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The euro-dollar is sharply lengthening its pace after the news announced today by the ECB. Will the upward movement still find fertile ground?
From a practical point of view, the decisions announced today by the ECB have slightly surprised the markets.
An increase in the PEPP was expected between 350 and 500 billion euros, while the decided increase was 600 billion euros and this gave the euro a further upward push, eliminating the concept of buy on rumors, sell on news.
Everyone expected that the Lagarde conference would be an exhaustion of the current trend which, as already highlighted in other interviews, does not seem complete.
As exaggerated as the upward movement of the euro in proportion and speed is exaggerated, it must be said that graphically speaking it has no obstacles, at least up to the 1.135 area, where it will encounter very long-term dynamic resistance.
Considering that the highly expansive move announced today by the ECB did not dilute the upside effect of the euro-dollar, at this point it is likely that the single currency has not yet completed its run.
For the cross it seems probable that the target in the 1.135 area indicated above will be reached, especially if the current correlation continues, which sees the weakening of the dollar as the lifeblood to support the rise in Wall Street and US exports.
Speaking of the weakening of the dollar, we note that this is also happening against the yen. What to expect for this change in the short term?
What was perceived today during the Lagarde press conference is on the one hand a sort of very robust quantitative easing, on the other, as often happens, looking beyond the cold number and weighing the words that accompany the decisions taken, the painted scenario from Lagarde it is that of a serious and compromised economy.
On the one hand, it seemed to me that the words of the number one of the ECB surprised positively, still giving momentum to the euro.
On the other hand, an uncertain economic scenario has been outlined and this is being reflected in a small interlocutory phase on the markets in which the yen tends to appreciate, given that this currency acts as a safe haven.
For the dollar-yen I see an intermediate target at 108.5, signaling a more substantial target in the 108 euro area from where prices could react to the rise.
Gold is trying to move backwards, but struggling to move away from $ 1,700. What can you tell us about this asset?
It must be said that in the last few hours gold had attempted a phase of extension which was then canceled, given the arrogance with which the American stock market continues to rise.
The gold theoretically would like to resume the ascending path, but when the stock does not accept correction dynamics, the gold beats in retreat and looks for a new opportunity.
Looking at the attached graph, we notice that the gold is enclosed in a well-defined range of triangular structure.
We have a key support area at $ 1,690 and an equally noticeable resistance area at $ 1,740 and if you don’t get out of this trading range, I honestly don’t see any particular directional indications.
Among other things, if the stock continues to perform well, it will be difficult to see particularly significant appreciation movements in gold.
Oil travels just under $ 37, back from a very marked recovery. Is the rise at the end of the race or is it just a pause before continuing to climb?
A little everyone, including me, was surprised by this strong recovery in oil and talking about targets today seems to me to be too theoretical and not very productive.
What we can say referring to the graph is that when there was the last collapse of oil there was a gap in the 41 dollar zone, so in the current excess it can be assumed that the target of this raw material is not complete.
The bullish target is in the $ 41 area, while the downside until the support at $ 35.5 / 35 is broken will maintain a bullish stance.
It must be said that at this moment oil is not a variable that indicates on the stock markets, but if it were to return to weaken, it could probably bring the stock exchanges with it, but for now there is no hint of this.
Speaking of Borsa, what predictions can be made in the light of the intermarket framework just outlined? Will the strength expressed in particular by some indexes continue?
Equity markets with different speeds are catching up with the whole coronavirus crisis.
As for the different speed of the Nasdaq, the same is also logical, because we must remember the fundamental rules of economics.
During the coronavirus crisis, the companies that did not suffer damage and indeed benefited from it, were those of online distribution such as Amazon, without forgetting the internet services that we have all abused.
That the Nasdaq Composite has completely canceled out the fall, returning to historic highs, all in all it can be there.
The question to ask is instead related to the stock lists with a more traditional composition, for which I have doubts.
As long as the euro is strong and the correlation between the weak dollar and the strong stock exchanges is maintained, evidently we will not see these reversed.
I report on the Dax a triple maximum drawn today after Lagarde’s words and the index is also in potential bearish divergence.
Unless Wall Street plays the charge again, the Dax would give the feeling of wanting to correct, but it must be said that with such a strong euro the stock will not go down.
Theoretically, therefore, there would be timid signs of an upcoming correction, but from a practical point of view with a euro that continues to rise, the hope of seeing the stock exchanges correct is not supported by the facts.
At the moment the equity is confirmed to be decidedly risk-on, but I do not see the convenience to buy at current prices and entering now seems very dangerous, given that the risk-return ratio is unfavorable for investors.