17-Nov-2020

1) EUR/USD Holds Steady Above 1.1850 On Coronavirus Vaccine Hopes
2) GBP/USD: Boris Reins In The Bulls With Tough Brexit Stance, A Buy Opportunity?
3) XAU/USD: Gold Volatile Within Range Below $1900 Amid Vaccine Optimism

1) EUR/USD Holds Steady Above 1.1850 On Coronavirus Vaccine Hopes

EUR/USD remains better bid above 1.1850 as the hopes for coronavirus vaccine and the prospects of the global economy returning to normalcy in 2021 continue to weigh over the safe-haven dollar. The EU calendar is light on Tuesday and therefore, the focus would be on the US Retail Sales data.

Acceptance above that level would invalidate the indecision signal by long wicks attached to Monday’s candle and imply a continuation of the recovery rally from the Nov. 11 low of 1.1745 toward the Nov. 9 high of 1.1920.

Alternatively, a move below Monday’s low of 1.1814 would imply an end of the bounce from the Nov. 11 low and shift risk in favor of a re-test of 1.1745. A violation there would expose the Nov. 4 low of 1.1602.  The immediate bias would remain neutral as long as the pair is stuck within Monday’s trading range of 1.1814-1.1869.

The currency pair has risen from 1.1759 to 1.1869 in the past three trading days and could score gains for the fourth straight day on Tuesday, as the risk sentiment has been buoyed by the biotechnology company Moderna’s announcement of positive results of its preliminary coronavirus vaccine. A week ago, the US drugmaker Pfizer published similar results for its vaccine, triggering a wave of risk-on action in the financial markets.

Apart from the improved risk appetite, the currency pair could benefit from growing odds of additional easing by the Federal Reserve (Fed). According to Reuters, analysts at Standard Chartered Bank and JPMorgan say the Fed will have to create a bridge [with more monetary stimulus] between now and when the coronavirus vaccines are rolled out in sufficient quantity to allow the US economy to recover. That’s because the US lawmakers will probably have a tough time approving a fiscal stimulus with the Congress split and President Trump refusing to concede.

Even so, the bulls need to observe caution the US stock market’s internal indicators show signs of exhaustion and sudden pullback may be seen, in which case, the greenback could pick up a haven bid. The Eurozone data calendar is light on Tuesday and the focus would be on the speech by European Central Bank’s policymaker De Guindos.

2) GBP/USD: Boris Reins In The Bulls With Tough Brexit Stance, A Buy Opportunity?

“Confident we will prosper without EU trade deal” – Prime Minister Boris Johnson has shown that he can move markets even when he is in isolation, sending the pound down. Johnson is confined after being in close contact with an MP who later tested positive for the virus. The PM is feeling well and even upbeat, as his feisty statement shows.

Brexit talks are reaching yet another crunch moment, as negotiators are trying to strike a deal before Thursday’s EU leaders videoconference. Both sides remain at odds over fisheries, governance, and a level playing field I rule related to state aid.

Hopes were higher due to two factors. First, US President-elect Joe Biden signaled that he would not sign a trade deal with the UK if it violates the Good Friday Agreement that secured peace in Ireland. The second reason for hope was that Dominic Cummings, the powerful adviser at 10 Downing Street, left his post. Cummings is considered the architect of the “Vote Leave” campaign and the copyrighter of the “Take Back Control” slogan.

These arguments – as well as pressure from British business – still provide hope for a deal. Johnson’s recent statement seems to be posturing ahead of a potential compromise.

On the other side of the GBP/USD equation, the safe-haven dollar has been slipping amid hopes for a coronavirus vaccine after Pfizer and BioNTech announced 90% efficacy in their immunization candidate, at least according to the preliminary results. Moderna, another American firm, may publish results this week and is also using the mRNA technology applied by Pfizer. Britain’s AstraZeneca is also conducting a Phase 3 trial.

On the political front, President Donald Trump has been unsuccessful in mounting a legal challenge to the election results and momentarily seemed to recognize his loss. While he later states that he did not concede, the flow of Republican politicians calling on him to allow for a smooth transition is growing.

With the elections looking more settled, investors find comfort in Biden’s intention to refrain from a nationwide lockdown despite rising coronavirus cases. The new administration will likely provide guidance, but leave decisions to governors.

Overall, there are reasons to be bullish on GBP/USD, and all that is needed is a positive Brexit headline to spark the next move higher.

Pound/dollar continues trading above the 50, 100, and 200 Simple Moving Averages on the four-hour chart, but momentum remains to the downside.

Support awaits at 1.3160, which is where the 50 SMA hits the price. It is followed by 1.3105, which was a low point last week, and then by 1.3065.

Resistance is at 1.3210, a swing high from last week, followed by 1.3245, the daily high. Next up, 1.3275 and 1.3310 await GBP/USD.

3) XAU/USD: Gold Volatile Within Range Below $1900 Amid Vaccine Optimism

Volatility returned to Gold (XAU/USD) markets alongside news of another promising coronavirus vaccine. The bright metal slumped 1.3% to a two-day low of $1865 after Moderna Inc. said its experimental vaccine was 94.5% effective in preventing infection following a late-stage trial. This comes after last week’s positive news from Pfizer Inc’s vaccine, showing 90% efficacy in its trial. The US treasury yields rallied on Monday, as the encouraging vaccine news boosted hopes of a faster global economic recovery, knocking-off the non-yielding gold. However, the price managed to reverse most losses amid spiking coronavirus cases, which continue to weigh on the US dollar and render positive for the ultimate safe-haven, gold.

So far this Friday’s trading, gold holds steady as rising US cases continue to pour cold water on the vaccine optimism. Meanwhile, markets remain hopeful of fiscal stimulus, especially after US President-elect Joe Biden called on Congress to come together and pass a new coronavirus relief package. Further, traders await the critical US Retail Sales data for fresh hints on the economic rebound, which could have a significant impact on gold prices.

As observed in the hourly chart, gold keeps its range within a rising channel after the 5% slump seen on November 9.

The range play is likely to continue so long as the spot holds the $1850-$1900 band. The risks remain skewed to the downside as the vaccines are likely to be rolled out by the end of this year, which could support the risk rally and weigh on the safe-haven bullion.

Meanwhile, only a daily close above the $1900 mark could negate the short-term bearish bias. The hourly Relative Strength Index (RSI) has dropped back below the midline, suggesting that the bears could likely retain control below the latter.