All is well that ends well – Market Analysis – July 21

By: Miguel A. Rodriguez

09:45, 14 September 2020

1595379777.jpg
After intense debates, EU officials reach a historic accord in providing Support for the EU countries

The highlight came in the early hours of the European morning, where European leaders reached a compromise on the recovery fund. 

This led to a fall in Euro in a "sell the fact" move, with EUR/USD declining from 1.1460 to a low of 1.1423, and then returning to levels near previous highs.


But the headlines sparked a better market tone with a return to risk-on mode. The peripheral countries' indices jumped upwards, in the case of Spain35, it slightly exceeded the first resistance around 7600 with a rise of around 1.5% and then consolidated in a corrective movement.


The agreement reached in Europe on the implementation of the next generation fund represents a historic milestone. 

For the first time, a joint bond issue that mutualizes risk will be carried out. It is a giant step in the evolution of the European Union that consolidates the monetary and fiscal union and undoubtedly reinforces the Euro's position as the single common currency. 

The lack of bullish movement in EUR/USD, which, for the moment, has not managed to overcome the barrier of 1.1500, is mainly due to the long over-positioning of market participants who, in a way, had already anticipated this fact with purchases of Euros. 

In addition to the strength factor of the first issue of mutualized bonds by the European Union, the possibilities of a faster recovery of the economies of the European Union member countries are increased, as the German Minister of Finance stated. 

US Dollar & Commodities

The Dollar has weakened notably against the other currencies in a scenario of greater risk appetite. In the case of AUD/USD, it has exceeded its intermediate resistance of 0.7060 and points towards theoretical targets of 0.7200 and 0.7290.

This movement is supported by the spectacular behavior of commodities, especially metals, which continue with consecutive highs in recent days. 

GOLD climbs to $1840 and steadily to the record highs of 2011 at $1920. In analysts' opinion specialized in this precious metal, the probability that these levels of historical maximums will be exceeded is high.

This keen investor interest in metals has awakened SILVER, which has experienced a rise of around 5% and has placed it right at its main resistance level at $21. 

Once this level has been exceeded, an upward trend would start that will take it out of the lateral movement of the last six years and have medium / long-term objectives in $25.25 - $26.


Share this article

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.