Markets Shake Off Worries; ECB May Press On Yields, Euro
FxPro Financial Services Ltd | Jul 22, 2021 07:59AM ET
Buyers once again dominate the markets. The S&P 500 added 0.8%, back to a week ago levels, and now just 0.6% below all-time highs. Since last November, this US broad market index has repeatedly found support on dips below its 50-day moving average, with the recent drawdown was no exception.
Earlier this year, such mini-corrections were followed by a renewal of historic highs—a possibility this time as investors and traders have seen enough demand for stocks during the downturn. Markets avoided the worst-case scenario of a spiraling selloff.
Oil added 5% on Wednesday, now trading near $71.40 for Brent. The pullback has stopped near the 76.9% Fibonacci retracement, which is a very bullish case. Oil is helped by a further decline in commercial stockpiles, indicating an operational deficit in oil despite fears of a fall in demand due to a new wave of COVID contagion.
The Brent price is testing the 50-day moving average on the daily charts. Only a bold rise above $72 will be a signal for a new bullish assault.
In the meantime, gold remains one of the laggards, having moved back below $1800. Last week, it failed to break above the 50 and 200-day average cluster area, putting selling back on the agenda. Locally, the price of gold went down along with rising long-term government bond yields. The inverse correlation of these assets is also strong on long periods, causing pressure on the gold price during rising rates times.
The issue of rates will be considered by the ECB today. It will be the first meeting since the European Central Bank formally raised its inflation target and noted a tolerance for exceeding it to revive the economy.
Some economists do not rule out that the said strategy revision would entail additional policy easing. It is unlikely that we will see such steps from the ECB right now. Still, in the longer term, we could see an extension of QE, which could pressure medium-term interest rates, potentially supporting gold and interest in equities while hurting the euro.
Get The News You Want
The FxPro Analyst Team
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.