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ZFX: Weak dollar amid easing policies, dollar index is testing 90
The greenback is testing the technical support of 90 on Tuesday as the risk-on mode is on track. Investors lower their safe-haven demand for dollar after the agreement of the relief bill from the US lawmakers.
The House of Representatives voted on Monday, based on the Trump’s request, to increase the pandemic aid payments to qualified Americans to $2,000 from $600. Such stimulus packages are undoubtedly boosting the market sentiment and pushing up the stock markets worldwide. As the uncertainty of the Brexit agreement has been significantly lowered, traders are much more optimistic towards the global economic outlook next year.
Stocks in Asia-Pacific were overall good today, following overnight gains on Wall Street. The Nikkei gained more than 2.6%, trading at levels not seen since 1990s.
However, it should be alerted that profit takings may cause retracements in the markets in short term. Gold price rose on Monday opening, touching $1900 area, as investors bet on inflation expectations, mainly driven by the easing polices in the US. But, facing an important tech resistance around $1900 level, gold price has made a fast correction back to $1870 afterward, ups and downs at a $20-30 ranging.
ZFX analyst Jacob Leung said that weak dollar and higher commodity prices are the typical outcomes from those stimulus measures in the US, at least according to the experiences in 2009 to 2011. We should have a look at Bitcoin, that has been pushed up to $26000-27000 level, reflecting the hedging needs and the distrust of those main central banks in the world.
On the other hand, despite the improvement of the fundamentals in the UK, Sterling hasn’t moved further up. ZFX analyst Jacob Leung said that it may also be profit taking activities in the short term following the confirmation of the Brexit deal. For the bullish view, traders will have no more “struggling” that may drive the Pound up to target 1.4.
For the $900 billion coronavirus relief bill in the US, the pass in the Senate was widely expected, leaving no uncertainty these days.