A Correction on the USD and Optimism on Stocks Continues, Despite the Continuation of the Zero COVID Policy in China
07 November 2022
The new week’s starting off in the same mood as it ended on Friday – bullish. Major indices are climbing higher, with the DAX beating the tops from October and September. It’s currently trading at the highest levels since August 19th.
Friday’s rise was largely attributed to rumours that China is about to ditch the zero Covid policy, which in theory should boost the economy. Interestingly, over the weekend, we find out that it’s not the truth but indices kept the positive attitude regardless.
This week has two major events. The first is Tuesday’s US mid-term election, which will determine which side, blue or red, will control congress. The second one is the CPI, which is about to be published on Thursday. Of course, a big print should support the recent hawkish rhetoric from Jerome Powell and hint that higher rates will be even higher and will stay with us for longer. In theory, that could be bullish for the USD and pretty bad for stocks.
On the Forex market we’ve also started with a continuation of moves from Friday. EURUSD is climbing higher, completely denying the sell signal that emerged on Thursday. We also have a continuation of the bullish reversal on pairs with the JPY. Most of them are climbing up, of course apart from the USDJPY, which is dropping thanks to the global correction of the American dollar.
Commodities are also on the run. Maybe not so much as on Friday but it’s still early days and the weaker USD could potentially help here a lot. Gold is currently testing an ultra-important resistance on the 1680 USD/oz, where a breakout would mean an amazing buy signal.
After Friday’s session, brent oil is also in positive territory with a mid-term buy signal. The price is currently flirting with levels last seen at the end of August.
We’re still deep in the earnings season and today the following companies will publish their results: British American Tobacco, Activision Blizzard and BioNTech.