Desperate times call for desperate measures – Market Analysis

By: Miguel A. Rodriguez

02:00, 01 January 1970

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Congress is yet to approve the stimulus measures taken by Trump

During the weekend, President Trump has signed four executive orders to maintain aid to the sectors most affected by the pandemic, and stimulate job creation. 

These include unemployment benefits, temporary payroll tax relief, student loan reliefs, etc. The measure has been taken by surprise. It was not expected by the market after the representatives of the parties in Congress did not finally reach an agreement on the stimulus package. 

The difference in positions is substantial, a matter of trillions of Dollars, although these negotiations are expected to continue to reach an agreement. 

Trump's executive orders also present a high degree of uncertainty regarding their legality; it is not clear that the president can decide by himself on some of the measures taken and above all if they are adjusted to the budget that has to be approved by Congress. 

In any case, per political opportunity it has had positive effects, the president prevails in the absence of agreement from the parties to solve the country's problems. 

This way, it has been taken over by the markets that maintain a slightly optimistic tone, despite the vast increase in geopolitical tension with China. 

Provocative acts such as the overflight of a Chinese fighter plane over the Taiwan border and the sanctions imposed on 11 American citizens by the Chinese administration do not help fuel an environment of risk appetite.

US equity markets

Stock markets are flat with very modest gains. Only in the currency market is a more positive attitude reflected in the US Dollar, which continues to gain ground.

The reasons for this rebound in the US Dollar are numerous, on the one hand, the technical one, after weeks of increases, a correction was expected, but to the technical correction, we must add the decision taken by Trump that is seen as positive in the market. At the expense of the approval of a larger definitive stimulus package and, to a lesser extent, the fear of increased geopolitical tension would support a rise in the Dollar as a safe-haven currency.

In this scenario, EUR/USD continues to correct downward after having made what may be a double top formation in the 1.1915 area that would trigger below the 1.1700 support and would have the 1.1500 area as a theoretical target.


Suppose the Dollar continues in its upward movement. 

In that case, GOLD is vulnerable to more substantial corrections that could take it to the price concentration zone around 1985, after having reached an all-time high in $2075 and being in the area of overbought with daily RSI pointing to bearish divergences.

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