Global stocks rally continues as hopes of a stimulus rise
Global stocks rallied today as investors priced-in more stimulus in the next few weeks. In Europe, the DAX, CAC 40, and FTSE 100 indices rose by 0.75%, 0.35%, and 0.10%, respectively. Similarly, in the United States, futures tied to the Dow Jones and S&P 500 index rose by more than 0.35%. The general view in the market is that the incoming administration, supported by Congress, will unleash more stimulus to support the economy. Democrats have committed to boost the recent stimulus checks from $600 to $2,000. They have also planned to provide more funds to state and local governments and increase investments in infrastructure.
The US dollar rose today after the first nonfarm payrolls of the year. In its report, the Bureau of Labour Statistics said that the economy lost more than 140,000 jobs in December even as more states announced stay-at-home orders. This was the smallest increase since April last year when the economy lost more than 25 million jobs. Further, the unemployment rate remained at 6.7% from the previous 6.7% while the U6 rate dropped to 11.7%. The manufacturing sector added 13,000 jobs while government payrolls fell by 45,000.
The euro dropped against the US dollar even after the strong economic data from Germany. In total, the country’s exports and imports increased by 2.2% and 4.7% in November from 0.9% and 0.4% in the previous month. As a result, the overall trade surplus fell from 18.2 billion euros to more than 16.4 billion euros. In France, exports increased to more than 39.3 billion euros while imports fell to 42.9 billion. Elsewhere, in Sweden, industrial production increased by 0.8% in November.
The EUR/USD pair dropped to an intraday low of 1.2213, which was lower than this week’s high of 1.2347. On the four-hour chart, the price has also moved below the rising trendline and the two moving averages, meaning that bulls are not in control. Also, oscillators like the Relative Strength Index and MACD have started to show signs of divergence. Therefore, there is a possibility that the pair will fall further during the American session.
The XAU/USD pair dropped to an intraday low of 1,880. This price is slightly below the rising trendline that connects the lowest levels from December. It also moved below the 25-day and 15-day moving averages while the RSI, MACD, and Stochastic have moved below the oversold level. Therefore, in the near term, the pair will likely continue falling as bears target the next resistance at 1,800.
The USD/CAD was little changed today after the US and Canadian jobs numbers. On the four-hour chart, the pair has formed a bearish pennant pattern and is below the moving averages. The Relative Strength Index (RSI) has remained at the neutral level of 45 while the MACD is slightly below the neutral level. Therefore, the pair will likely continue falling as bears target the next key level at 1.2650.