Investors are once again betting on faster economic growth and a return to normalcy. This has boosted the European and US futures. There is no doubt that global equities have recorded their best month since 1982, and it is very likely that we may see traders keep pushing equities higher as there are more reasons to be bullish for the next 12 to 18 months than bearish. One of the biggest reasons to remain positive is that life could be returning to normal in a few months as we do now have a coronavirus vaccine.
Having said that, traders need to make sure that they do not take their eyes off the ball, as there is still a substantial risk to the global economy, especially for the US economy in the short term. After all, the vast majority of optimism is chiefly fuelled by central bank support and monetary policy. Yesterday, we had another warning from the Federal Reserve’s Chairman, Jerome Powell, who made it clear that the US economy is still in desperate need of further stimulus. He made it clear that lawmakers need to get their act together and pull the trigger for a second stimulus aid package.
So far, there has been little to no progress on the second aid package, and the reality is that it is highly unlikely until next year. Perhaps, it may not be wrong to say that we may not get another stimulus until Joe Biden takes control of the economy, and at that time, we may not even need further stimulus aid. The Federal Reserve Chairman gave no indication of how the monetary policy will be shaping up over the coming period, ahead of his Senate hearing today. The Senate Banking Committee is highly likely to pose questions to the Chairman about how he is preparing to respond to all the threats in the absence of the fiscal stimulus package. His answer is very likely to move the dollar index sitting at a two-year low.
In the Forex market, the Reserve Bank of Australia kept its interest rate unchanged during its monetary policy meeting—a decision which was widely expected by traders. For this reason, the move for the AUD/USD was completely lackluster. Having said that, the uptrend is still very much in play for the AUD/USD, and it seems like bulls are about to gain more strength as the 50-day SMA is about to cross above the 100-day SMA on the daily time frame—a signal which is considered bullish among technical analysts.
As for commodities, gold prices have finally shown some signs of life as the price has come close to its 50-week simple moving average. It is highly likely that we may see the precious metal moving higher from here onwards. On the intra-day time frame, such as the 30-minute time frame, the price is also looking bullish as the price has jumped above the 50-day SMA. In terms of economic events, it is all about the US NFP data, which is due on Friday.
Crypto-king, Bitcoin made a new all-time high yesterday. Clearly, the Black Friday sale is over, and bargain hunters have been able to bag some bargains. The Bitcoin price’s big resistance level is still at 20K, and only a break of that will open the door towards the next main target, which is the $50K mark. We have also seen a decent recovery in other coins, such as Ripple’s XRP, which is trading at 0.65, still far from this year’s high of 0.78.