Bulls have lost their sting, and this is pushing the stock markets lower. There are a lot of concerns among investors about the rise in the coronavirus cases, and this is making them nervous. Hence we do not see the same appetite among risk-takers. It is important to keep in mind that the rise in covid cases also means that there is a strong possibility of a vaccine getting the green light from the regulators, which can shift the market sentiment once again. After all, traders have been waiting for a vaccine for a long time, and this is the only medicine for the economic activity to return to its normal. This doesn’t mean that it is likely to happen straight away, but it will certainly make the job easier for central banks who have been pumping the money to provide liquidity and support investor confidence.
Another important factor for investors is the approval of the stimulus package, which is badly needed. The Fed has made it clear that without this, the US economy is highly likely to continue to struggle as US states are still putting more restrictive measures that are influencing the economic activity. Covid restrictions are putting the smaller to bigger businesses at far greater risk now, and if the economic package isn’t approved soon enough, it is likely that we will see more carnage in the equity market, despite the vaccine approval. Of course, for a very short period, we may see the equity markets moving to an all-time high, but that optimism isn’t likely to last.
In terms of commodities, momentum is clearly coming back to the precious metals as the yellow metal surged yesterday on the stimulus optimism. The US lawmakers seem to be more motivated to find an agreement on the stimulus package, and there are chances that the US economy may get another relief package of $908 billion. In terms of technical price levels, the gold price has recovered more than 5% of losses from its recent high, which pushed the price towards a five-month low. In addition to this, the price has crossed a major hurdle on the daily time frame, which is the 200-day SMA—a sign which attracts fresh capital. As long as the price stays above the 200-day SMA on the daily time frame, the chances are that we will see another bull rally for the gold price.
In the forex market, it is all about Brexit, and every headline seems increasingly pessimistic. The British Prime Minister, Boris Johnson, is making the final attempt to find the deal, which seems to be lost in the sand. Traders know that this will be the final push for a Brexit deal, and the Sterling has become increasingly more volatile on the back of this. The currency is very likely to see major spikes, while a deal and no-deal scenario continues to play. For many investors, the base case scenario is still that there will be Brexit in the final hour, final minute, and the final second.