Monday Market Wrap & Sentiment Analysis

During today’s Asia-Pacific session the risk tone was indecisive with a mixed performance from indices, lower levels of volatility, and no clear distinction between the performance of high beta currencies or safe-haven currencies.

In the Foreign Exchange complex, the USD was the clear under-performer with the DXY (U.S. Dollar Index) breaking below the 94.000 handles.

Explaining the USD’s weakness, Reuters stated: “The dollar crumbled on Monday as cracks in the U.S. economic recovery drove investors away from the world’s reserve currency as they increased bets that the FED (The Federal Reserve) could flag another accommodative shift in its outlook this week.

In contrast, the EUR which is currently leading the FX Majors; however, like most majors, the USD weakness is largely attributing to its strength.

We can expect the USD to remain broadly pressured ahead of the FOMC meeting this week.

XAU/USD

Gold prices hit an all-time high of $1944.5 per troy ounce on Monday amid mounting U.S.-China tensions and concerns about the global economic outlook as the coronavirus pandemic is far from controlled and new hot spots emerge.

Gold remains a solid buy against the U.S. dollar as the U.S. economy’s outlook is weak Vs Europe, therefore as the Dollar weakens vs the Euro, investors must protect the value of their dollar investments by buying Gold. 

U.S Stock Markets

Dow Jones futures started the week around the flatline while the S&P 500 and the Nasdaq were higher as investors await another big round for earnings, the Fed’s monetary policy decision on Wednesday and U.S. lawmaker’s stimulus negotiations.

?? EUR / USD ??

The euro remains bullish against the U.S dollar as Europe’s economy is expected to grow at a faster rate than the U.S economy coming out of the pandemic.

Investors are therefore exchanging U.S. dollars to buy euros to invest in European companies and assets to get a better return over the coming years.

This is the fundamental reason behind the euro strengthening against the U.S. dollar.

?? USD / JPY ??

We are seeing more weakness in the U.S. dollar against the Yen as markets continue to price in the negative outlook for U.S. Growth vs the Rest of the World countries that offer a more stable outlook coming out of the pandemic.

Sentiment Analysis ?

[27.07.20 17:16]

During today’s European session the risk tone is leaning more risk-off with EMEA indices mostly negative as ongoing tensions between the U.S. and China weigh on the overall tone.

Additionally, there are expectations for a potential downbeat tone from the FOMC at this week’s meeting.

USD weakness is continuing to support EUR pairs, and the euro is currently leading the majors for the current session although JPY is also outperforming as it emerges as the preferred haven under current circumstances.

In the sessions ahead we expect ongoing USD weakness to continue benefiting its major counterparts, especially the JPY if the risk tone continues to sour.