Wednesday Worldview: 29th July 2020
In this week’s edition of “Wednesday Worldview,” we start off as we did last week by first covering the US financials and how it affects the rest of the global financial world. Taking a look at the DXY (US Dollar Index), we can see the bearish trend continuing, with some recently-increased downward pressure as the DXY falls to pre-pandemic lows. A new coronavirus aid package is expected to arrive this week, totaling over $1 trillion. This stimulus package includes support for direct payments to American citizens, increased unemployment benefits, an extended moratorium on evictions, and raised relief for business owners. Whilst this should provide a necessary boost to American citizens, the effect this stimulus package will have on the actual US dollar should be less than ideal, especially given the DXY’s already precarious position.
Because the US dollar is in such an unfavorable position, we’re seeing an exodus of investors and traders moving to safer assets and currencies. One such sector which is seeing a lot of attention in this exodus is the precious metals space. Both gold (XAU/USD) and silver (XAG/USD) have had a bullish uptrend since the pandemic took hold in March. Silver currently sits at $25.35, which is the highest level it’s been in nearly a decade. As for gold, XAU/USD just broke all-time highs above $1912. With tensions continuing to rise between the US and China, a weak US dollar, and incoming fiscal stimulus, there’s little reason to think the precious metal space will stop moving up here. Going forward, it may be worth a look to check out less-talked about precious metals such as platinum (XPTUSD).
Precious metals are not the only asset rallying on USD weakness. Taking a look at the UK, we see the British Pound hit its four-month high against the US dollar, reaching as high as 1.2859. Because of the recent significant downward pressure on USD, it’s important to note that this rally is not necessarily a vote of confidence in the GBP. Almost all major currencies and assets have been appreciating against the dollar for the last few weeks. However, conditions for DXY do look a bit oversold at the moment, so GBP/USD will be fascinating to watch going forward, especially given the lack of any economic news for the UK on the horizon.
Jumping right into EUR/USD, growing fears continue to smash the US dollar over increasing concerns about China-US relations and the ongoing Covid-19 pandemic. The EUR/USD pair is trading in the 1.1740 zones with technical indicators showing it in the overbought territory, but it shows no sign of an exhaustive uptrend, so this EUR/USD rally could continue for a while.
Before heading into our next final section of Cryptocurrencies, known for their volatile markets, we’ll take a look at JPY/USD, which in contrast, is known for its tight trading range. The dollar’s sell-off continues to expose the 104.45 price range for JPY/USD, and we currently see it trading at the 105.3 level, the lowest level in over 3 months. This dollar sell-off is happening universally against currencies and assets right now (Gold, Bitcoin, GBP, etc.), as the world seems to revisit the dollars’ strength.
Jumping into BTC/USD, the price action seems almost euphoric after successfully smashing a longtime $10k resistance and, at the time of writing, clearing past $11,000. All eyes are back on the world’s most infamous asset, Bitcoin. Leading the charge, Bitcoin & Ethereum, both are in robust uptrends after ETH/USD broke out of $250 resistances, and smashing the glass ceiling of $300. With RSIs on both currencies rising quickly, one might expect a quick retrace on both currencies, but with 24hour markets, it’s hard to ever really predict these digital assets. The key takeaway, expect the unexpected. Perma-bears will be attempting to short this, while bulls will be riding their longs. At this point, it’s best to let the market decide, but investors in traditional markets wait for years for price actions like this, so don’t be left out as you can trade all these popular currencies at Overbit.com.
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