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Market Outlook
ZFX: Mixed sentiment maintains! Dollar index tested 91 edge    - Zeal Capital Market

ZFX: Mixed sentiment maintains! Dollar index tested 91 edge   

02-12-2020 09:45

Asian stocks were mixed on Wednesday, losing upward momentum despite the Wall Street breaking new highs overnight. European stocks also mixed in the opening session. The S&P 500 rose over 1.1%, hitting a new record closing high and the Nasdaq jumped around 1.3%, also making a new record high on Tuesday.

Gold price turned to be the focus on Tuesday, jumping more than 2%, back to the $1800 level. Traders expected that the stimulus package in the US is backed to the track now, triggering sell-off pressure over the dollar, on the other hand supporting the safe-haven metal. Investors are hopeful for a new stimulus package “talks” between top Senate Republican Mitch McConnell, Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi, even though the final scale of the bill is not certain.

ZFX analyst Jacob Leung said that, the positive progress of Covid-19 vaccine development weakened the safe haven demand for gold obviously these days, pushing the gold price down around $200/Ounce. Such a sharp rebound of gold price may include technical correction, which means that we can’t be so optimistic in the short term, especially near $1830-$1840 big resistance area.

Oil prices extended the “slowly” weak trend these days as OPEC+ has delayed the formal meeting this week to Thursday. Investors are doubtful whether OPEC+ members will confirm the extension of their production cut plan in January.

ZFX analyst Jacob Leung said that if OPEC+ fail to make the deal, the output increase will be a shock to the oil market as these weeks the traders actually have “priced-in” such expectation. Looking at the figures, oil inventories in the US showed that the demand in oil market is still weak under severe pandemic.

On Wednesday, it is reported that the UK has authorized Pfizer-BioNTech coronavirus vaccine, making it available for use from next week. “In the medium term, the whole financial market will be normalized. The sentiment over the market will be much more stable.” Jacob Leung mentioned.

Weak dollar may be a key driver, testing 91 level, which is a low since April 2018 of dollar index. Investors are now “cautious” bullish due to the hopes of the vaccine and fiscal stimulus in the US, boosting up those riskier currencies like Aussie and Euro.

ZFX analyst Jacob Leung said that there is no doubt that the improving risk appetite will hurt the dollar. The guaranteed “hot money” from the Fed these years will be released to the asset markets when the situation is “no longer panic”, meaning that the market is able to make a clear prospective in the foreseeable future.

Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.