03.07.2020: USD still overvalued (USDХ, DJIA, WTI, BTC, USD/CAD)
Markets have come to a standstill ahead of the national holiday in the US. Nevertheless, investors are braced for a highly volatile new trading week and the third quarter. There are a lot of headwinds which could disrupt the rally. Some investors are braced for the bear market.
Markets in the first half of year looked like a roller coaster. Judging by the events in early July, the third quarter is going to be equally turbulent. Investors are alarmed by rampant daily rates of new coronavirus cases in the US. Other countries also suffer the pandemic resurgence. The coronavirus news will be the main factor to overshadow market sentiment next week.
The downward correction across global markets comes as no surprise. Investors find it necessary to protect their savings in case of the second shutdown which will disrupt the economic recovery.
Traders have already responded to upbeat US nonfarm payrolls released yesterday. Nevertheless, the positive trend in the US labor market can prop up market sentiment in the medium term. US stock indexes are closing the week in the red. Both the Dow Jones and the S&P 500 shed nearly 0.3%.
The US dollar index is trading marginally higher at about 97.20. The overall trend is negative. Despite coronavirus fears, speculators increased bets against the US dollar to the greatest extent over two years. Now traders are adding more short deals. In June, the US dollar lost 1% against the basket of major rivals. Besides, the index tumbled over 5% since a three-year high in March. Nevertheless, the US currency remains overvalued. However, it is widely expected to lose ground by the presidential election.
The Canadian dollar found support from strong trade balance data and rising oil prices. So, the USD/CAD pair is following the overall downtrend after a minor bounce. The pair is heading for 1.3490. On the other hand, analysts do not rule out a climb towards 1.37.
Today a downtick in oil prices is caused by fears about a revival in energy demand. Nevertheless, both benchmark grades are closing the week with gains. WTI is trying to stay firmly above the level of 40 dollars a barrel.
Meanwhile, bitcoin has been trapped in a trading range since late April. This week, the cryptocurrency is trading quietly. It is hovering at around 9,100 dollars per token over the recent seven days. On late Thursday, bitcoin went below a 50-period moving average. Interestingly, the most popular cryptocurrency still avoids massive selling.
The downward target for bitcoin could be 8,300 dollars. Such a sharp decline could be viewed as a favorable scenario because this may attract new buyers.
It is a common thing that an asset turns sour after it escapes from a trading range. This time, outcome could be different. Perhaps, crypto bulls are getting ready for a push.
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