Markets take a breather as central banks fire up the printing presses – Market Analysis – June 16

By: Miguel A. Rodriguez

09:45, 14 September 2020

Both Fed and EU prepare to pump up the markets with cheap money

The announcement of the Federal Reserve that they are going to buy corporate bonds in their asset purchase program was enough for the markets to experience gains again and for market risk sentiment to become more positive.

Stock markets have returned to positive numbers and, in the case of USA30, with gains above 3%.

Inadequate data on the evolution of the pandemic in the United States and China are no longer in the spotlight of investors. 

Even the serious incident in North Korea about the blowing up the building that housed the liaison agency with South Korea in an extremely hostile gesture has not been taken into account by the market, something that in other circumstances, would have been a serious element of concern in the area of geopolitics.

Macro data partially supports the optimism

It is evident that the investors' attitude is positive, and they are eager to buy stocks anticipating a speedy recovery of the economy and an improvement in the epidemiological situation.

In this sense, the essential retail sales data published today in the United States has reinforced this sentiment. The data shows a spectacular rise of 17.7% vs. an expected 8%. Market expectations will be met if the figures continue this trend, especially in the area related to personal spending and domestic consumption.

The European stock markets have also benefited from this better feeling of risk. Optimism can be increased if the European Commission's meeting this Friday advances in the implementation of the Rescue Fund designed to help the most affected countries by the crisis induced by the epidemic.

Italy40 would be one of the indices with the highest bullish potential in this case. 

Technically we can see that after the corrective movement to just the previous resistance level, now support, located at 18112; it has returned to the upside, already exceeding the 100-day SMA in 19318 and making its way upwards towards its next target at 21059, 200-day SMA.


In a scenario of a return to risk-on of the markets and with a clear ceiling in the interest rates of the dollar imposed by the Federal Reserve, the US Dollar should tend to weaken gradually in the medium term. 

On the other hand, OIL seems to have stabilized at current levels in a lateral consolidation movement between $35 and $40.

 An improvement in global demand for crude oil cannot be ruled out, which could take this commodity to a higher level of trading between $41 and $45 per barrel.


With a weaker Dollar and sustained crude prices, the USD/CAD pair continues to have a downside room. Technically it seems to be performing a reversal pattern that needs a close below 1.3500 to head towards the area of the last lows located at 1.3350.


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