Long gone seem to be the days when the global sentiment was optimistic – Market Overview – November 17

Long gone seem to be the days when the global sentiment was optimistic – Market Overview – November 17

A new vaccine, Moderna's, has been successfully announced with an even higher effectiveness rate than Pfizer's.

However, the market reaction has been more cautious this time. Stock markets reacted higher in a more modest way and today are moving around profit and loss without the bullish momentum we saw last time.

After the optimistic scenario, it is a logical reaction previously reflected in the market with rises for almost two consecutive weeks.

But there are still fronts of uncertainty pending to be resolved. The contagion figures, far from improving, continue their upward path, and the shadow of the lockdown in European economies continues to be present. There are still months for vaccines to be used and for immunity results to be verified to avoid mobility restriction measures that are negatively affecting world economies.

Undoubtedly, a decrease in the numbers of contagions and the reopening of the currently restricted economies would be good news that could not come soon enough.

The market mood remains optimistic, hoping that this will happen sooner rather than later, but definitive confirmation is needed for the stock indices to resume their bullish path with more impetus.

IBEX35

It is true that some stock indices, such as the Spanish IBEX35, have reacted more strongly to the upside than the rest.

Something that we already indicated in previous analyzes.

It is undoubtedly a consequence of having been one of the worst-hit during the pandemic with a high component of stocks in the service sector, such as tour companies and banks. This index has had a very positive behavior in recent days. If the good news regarding progress with the vaccine is confirmed, it could recover shortly all the territory lost during the pandemic.

Technically, it is approaching a significant resistance level that would act as a pivot in the 7953 zone. If this level is exceeded and there’s a daily close above it, the index would head higher with a first target at the retracement level of Fibonacci of 0.618% at 8444 points.

USD losing ground

On the other hand, the US Dollar continues to weaken. This is a consequence of a more significant risk appetite of investors, previously the Dollar had acted as a safe-haven currency, and historically low-interest rates on the currency, and the growing expectation that the Federal Reserve could act again by increasing its expansionary policy monetary.

AUD/USD is a currency pair that is particularly benefiting from this situation, in addition to the substantial improvement in the environment for trade relations after China signed the free trade agreement between Pacific countries.

Technically, the pair needs to overcome two resistance levels located at 0.7338 and 0.7410 to head towards maximum levels not seen since the beginning of 2018, and that would have as its first theoretical objective in the area around 0.7600.

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