September 9, 2020

Vaccine Trail Halts, Stock Futures Vulnerable

Vaccine Trail Halts, Stock Futures Vulnerable

U.S. futures are swinging between gains and losses as traders have shown their concern at a possible delay in the Covid-19 vaccine. This comes on the back of the news that one of the people involved in the coronavirus vaccine trial by AstraZeneca became ill. The company has paused its trial as it conducts an investigation, and this has raised alarm bells on two fronts.

Firstly, there have been safety concerns. This is because we have never ever seen a vaccine becoming available this quickly in vaccines’ history. It usually takes years for a vaccine to become available as pharma companies need to ensure that a vaccine is 100% safe. Additionally, if we hear similar news from other companies that are in their final stages of testing the vaccine, they will also have to pause their trail. 

This means that all this optimism that we have seen in the market about the availability of a vaccine is likely to fade away rapidly. If this does take place, it means a lot of pain for the hospitality sector. Airline and pharma stocks are likely to get beaten up rather badly. 

Finding the Floor 

As for the tech stocks, the rout continued over in the U.S. There is no doubt in saying that the U.S. tech sector led the coronavirus stock market rally and it is this sector that is making many investors nervous. The question which is on everyone’s lips is if we are going to see more of this carnage or if this is the bottom. 

The Nasdaq index has experienced three days of intense sell-off, and it has reached its 50-day simple moving average on a daily time frame. If the price doesn’t bounce from here, then it could mean more pain for tech stocks. 

Sterling Took a Further Beating 

In the currency market, the Sterling took a serious beating yesterday. This was chiefly due to the Prime Minister Boris Johnson’s reckless behaviour,, after he indicated to the E.U. that he is ready to walk away from a Brexit deal. The entire situation is so frustrating that the U.K. government’s top lawyer has resigned. He is no longer going to help the government in the Brexit withdrawal agreement. 

Johnson Wants to Back Paddle 

Mr. Johnson wants to back paddle from the original Brexit draft agreement, which literally took an eternity to put in place. No one wants to go through the same pain again. However, this could be one of Boris’s strategies to throw the E.U. off balance and get things his way. But for the time being, the only thing that he is achieving is more pain for the Sterling and for top members of his team, leaving them in utter frustration. 

U.K. leaving the E.U. is a process that is full of pain, and unfortunately, the policy makers with their reckless behaviour are only making the matter more arduous. There is no doubt that the U.K.’s economy is going to bear the brunt of the pain in the coming years, even if we leave the E.U. with a deal. Leaving the E.U. without any deal is simply a disaster. Having said that, matters aren’t going to be much different for the E.U.; hence it is in both parties’ interest to form a deal and depart on good terms.  

Sterling-Dollar Below 1.30

The British pound has broken the critical support of 1.30 against the dollar, and currently, it is trading at 1.2971. It is highly likely that there is still more pain ahead for the currency. It is important to note that the GBP/USD was trading at 1.34 last week, the currency sell-off is intense, and the move is like a falling knife.

This means that the RSI is showing an oversold signal on a daily time frame. It is likely that we may see a mean reversion trade. But for now, the path of least resistance is skewed to the downside, and that means more pain is ahead for sterling. If the Brexit situation continues like this, the Sterling-dollar pair can easily fall to 1.25. 

More Pain For Oil 

Oil prices also experienced a heavy sell-off yesterday, and both Brent and Crude Oil broke some important levels. Brent is trading below the $40 mark, and given the concerns around halting the research of a potential vaccine, it is likely that Brent may continue its move to the downside. The immediate support could be near the $35 mark.

As for Crude Oil, tomorrow, we have the Crude inventory data. The event is likely to bring higher volatility to the Crude. The immediate support level is at $35, and a break of this is likely to open the floor for its support level which is near $30

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