13-Nov-2020

1) EUR/USD: Euro Has Three Reasons To Rising Despite Dark Covid Clouds
2) GBP/USD: Cable Extends Pullback On Political And EU/UK Talks News
3) XAU/USD: Gold Stuck Between $1890-$1850, Awaits A Range Breakout

1) EUR/USD: Euro Has Three Reasons To Rising Despite Dark Covid Clouds

Another day, another record high in US COVID-19 cases and hospitalizations. The worrying picture is weighing on markets and the classic move would be a move toward the safe-haven US dollar. Will EUR/USD fall? Not so fast. There are three reasons to see an upward move at this juncture.

While some American hospitals are overwhelmed by covid cases, there is a glimmer of hope in Europe. Several countries have taken measures – from shuttering of activities to total lockdowns – and this is beginning to bear fruit.

A sustained drop in cases would imply lesser pressure on hospitals and an opportunity to enable additional activities in the lead up to Christmas. So far, German Finance Minister Jens Spahn remains cautious, and so is French President Emmanuel Macron.

Christine Lagarde, President of the European Central Bank, referred to an upcoming vaccine as “seeing the other side of a wide river” and also called for additional fiscal and monetary support to wade through the muddy waters. Nevertheless, there is room for some optimism.

President-elect Joe Biden continues building his team ahead of inauguration day on January 20. While President Donald Trump refuses to concede, additional Republicans are either congratulating him or calling the White House to share intelligence briefings with the incoming administration – an acknowledgment of the results.

The most recent counts put Arizona firmly in Biden’s column and a recount in Georgia is unlikely to change the picture. Trump has not spoken in public for over a week, but his tweets focus on Fox News – accusing them of not supporting him. Looking for who to blame is a sign that he is also coming to terms with his defeat.

The lower chances of a contested election may also contribute to a calmer mood in markets, limiting any gains by the dollar.

US ten-year Treasury yields have been extending their climb down, and that may weigh on the dollar. Returns on the benchmark bonds nearly hit 1% on Monday, following Pfizer’s earth-shattering news of 90% efficacy in its vaccine candidate.

The rotation from bonds to stocks allowed the greenback to recover its early losses and sent EUR/USD tumbling down from the highs above 1.19 to below 1.18. The reverse move may be happening now.

Overall, EUR/USD has room to rise, despite America’s loss of control of the virus.

Eurozone Gross Domestic Product figures for the third quarter will likely confirm the initial read of 12.7% growth – coming after a collapse in the second quarter. In the US, the University of Michigan’s preliminary Consumer Sentiment Index is set to remain above 80, holding onto the recent gains but still staying below pre-pandemic levels.

Euro/dollar has recaptured the 50, 100, and 200 Simple Moving Averages on the four-hour chart, a bullish sign. On the other hand, momentum is marginal to the downside. All in all, the picture is mixed.

Resistance awaits at 1.1820, the high point on Thursday, followed by 1.1860, a swing high from early November. The next lines are 1.19 and 1.1920.

Support awaits at 1.1780, which was a swing high early in the week, followed by 1.1740, the weekly low. Further down, 1.17 and 1.1850 await EUR/USD.

2) GBP/USD: Cable Extends Pullback On Political And EU/UK Talks News

Cable dips further on Thursday, following Wednesday’s upside rejection and bull-trap above Fibo 76.4% barrier at 1.3291.

A daily close in red was the initial negative signal, with fresh extension lower in early Thursday’s trading, driven by soured sentiment on the resignation of PM Boris Johnson’s director of communications Lee Cain.

Signs that EU/UK trade talks might extend past the mid-November deadline and weaker than expected growth of the UK economy in Q3, weigh further on the pound.

The pullback from the new nine-week high at 1.3311 extends below the 1.3200 handle and eyes pivotal Fibo support at 1.3136 (38.2% of 1.2855/1.3311 upleg), with a break here to risk extension towards strong supports at 1.3080 zone (daily cloud top/50% retracement of 1.2855/1.3311/converged daily Tenkan-sen/Kijun-sen).

Bearish divergence of 14-d momentum on the daily chart and stochastic emerging from overbought territory, support fresh bears for a deeper pullback, but news about the progress of trade talks are expected to remain pound’s main driver.

3) XAU/USD: Gold Stuck Between $1890-$1850, Awaits A Range Breakout

Gold’s (XAU/USD) posted a green candle on Thursday, having risen 0.60% to finish around $1875. Despite the uptick, the bright metal remained trapped in its recent range between $1890-$1850. Gold benefited from increasing concerns over the global economic recovery, in the wake of the continued rise in coronavirus, which negated the optimism over the vaccine progress. The US Treasury yields fell 10 basis points on Thursday on economic growth concerns and lifted the demand for the yieldless gold. Although the gains in the metal remained capped, as the US dollar held steady in the upper bound of this week’s range on fresh concerns over the fiscal stimulus and Wall Street tumble.

Heading into a weekly close this Friday, gold traders await a strong catalyst to break free from the range trade, as covid updates from across the globe will continue to influence the broader market sentiment and dollar flows. Also, the US Michigan Consumer Sentiment data will be closely eyed alongside reports of potential restrictions likely to be imposed in the US states.

Looking at the four-hour (4H) chart, gold extends its downside consolidation phase following the 5% slump seen on Monday.

Although higher lows are seen over the past hours, the risks remain skewed to the downside, as the Relative Strength Index (RSI) remains in the bearish territory, currently at 44.55.

To the upside, the convergence of the 50, 100, and 200-4H Simple Moving Averages (SMA) around the $1900 level is the level to beat for the bulls.

The bearish bias remains intact so long as the price stays below the aforesaid critical resistance. A daily closing above the latter is needed to negate the downside bias.

Alternatively, a breach of the rising trendline support at $1863 and a subsequent daily closing below it could recall the strong $1850 support. The next downside target awaits at $1800 – psychological level.