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Second wave of COVID-19 disturbs markets – Market Analysis – June 26

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
Last trading session of the week leaves a lot to be desired

Another choppy risk session this Friday in which investors do not take a clear direction. 

The increase in the number of infected and the critical situation of the health system in some North American states raise brows. The Federal Reserve has prohibited buyback operations and has capped the payment of dividends from banks until September, which is also a brake on these stocks.

The North American economic figures follow a favorable evolution with Personal Spending for May + 8.2% vs. -12.6% the previous month.

The European stock markets perform better, especially those of the peripheral countries Spain and Italy, with slight increases that gradually close the gap caused by the crisis between the North American and European indices. 

This movement has its leading cause in the most positive evolution of the fight against the pandemic in Europe and awaiting the news of the approval of the European rescue fund that will be the main trigger for European stocks when it occurs.

Commodities

COPPER is oblivious to the current uncertainty in other markets and continues its upward movement, undoubtedly a clear sign that industrial activity is resuming. 

The traditional direct correlation of this metal with the behavior of the principal North American indices, especially the USA500, could be a leading indicator. COPPER is surpassing the resistance level at 2.6980, a daily and weekly close above these levels paves the way to the 2.80 zone.


 OIL has lost some of its bullish momentum being unable to overcome resistance at $41.26, where, for the moment, it may have formed a double top figure. 

The latest inventory figures have shown increases above expectations. Although global demand is gradually returning to normal, the Oil price is beginning to show signs of exhaustion after the rapid recovery from lows. 

Daily RSI has bearish divergence that could push crude to support at 35.11. Below this level, the double top would be triggered with a theoretical target at 29.20.


The UK & British Pound

There is no news acting as major market-movers in the forex market so far, only next week as the next round of Brexit talks between the UK and the European Commission could be the trigger for moves in the Sterling Pound. It is usual, especially at the beginning of each trading round, that the news is not favorable about a consensual Brexit. If so, the Pound would be the most vulnerable currency.

For this reason, the market will be on the lookout for the EUR/GBP pair, which has moved in a range between 0.9000 and 0.9076 in the last two weeks. Negative news for the Pound would lead this pair to overcome the upper zone that coincides with 0.50 Fibonacci retracement of the entire previous downward leg and would clear the way to the next Fibonacci level at 0.9185.

 
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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.