Equities Turn North Again, ECB Takes Center Stage

Equities Rebound as Investors Buy Back Tech Stocks

The US dollar traded lower against all but one of the other G10 currencies on Wednesday and during the Asian morning Thursday. It underperformed the most versus NOK, SEK, and NZD in that order, while it eked out some gains only against JPY.

DAX — Technical Outlook

On Tuesday, DAX 30 had a strong rebound from its short-term upside support line taken from the low of August 7 th. Yesterday, the German index continued accelerating, breaking above key resistance, at 13162, marked near the highs of August 7 thand 8 th. We can see that the cash index is currently finding another resistance near the 13317 hurdle. If that hurdle gets broken, we will get a bit more comfortable with examining higher areas, hence why we will stay somewhat positive, for now.

Will the ECB Talk Down the EUR? Or Not?

As for today, the main event on the agenda is the ECB monetary policy decision. The last time they met, ECB officials refrained from altering their monetary policy, but stayed ready to adjust all their instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner. At the press conference following the decision, President Lagarde urged EU governments to take action in battling the coronavirus pandemic, with EU leaders eventually agreeing on a EUR 750bn rescue fund. The euro entered a rally mode against its US counterpart, perhaps on hopes that with a fiscal aid, the Eurozone was likely to recovery faster. What may have also helped EUR/USD to march higher was the Fed’s decision to adjust its inflation approach, noting that they will now aim a 2% average inflation, which means extra loose policy for longer.

EUR/JPY — Technical Outlook

Yesterday, EUR/JPY popped above its short-term tentative downside resistance line drawn from the high of September 1 st. After reaching the 125.64 barrier, the rate slowed down its acceleration. Now the pair seems to be forming a possible bullish pennant, which might attract more buyers into the game. In order to get comfortable with higher areas, at least for the near term, a break of the 125.64 hurdle would be needed. Until then we will take a cautiously-bullish approach.

As for the Rest of Today’s Events

During the European morning, we already got Norway’s CPIs for August. The headline rate rose to +1.7% yoy from +1.3% as expected, while the core one inched up to +3.7% yoy from +3.5%, instead of staying unchanged as the forecast suggested. This, combined with the fact that GDP for mainland Norway contracted at a pace very close to the Bank’s own estimate, may allow Norges Bank officials to continue sitting comfortably on the sidelines.

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