The US dollar has fallen hard during the trading session on Friday to reach the 1.29 area against the Loonie. The Canadian dollar has a strong correlation to the oil market, which of course was very strong during the session. The question now is whether or not the previous resistance will offer support near the C$1.29 level, or if we continue to fall and breakthrough that area to enter the previous consolidation area? Ultimately, the market should have a little bit of a reaction to that area based on the gap that we have jumped above.

The size of the candlestick is rather bearish, but it is also worth noting that we have seen a lot of support there over the last week, so it will be interesting to see if we can bounce from here. A lot of this will come down to whether or not oil truly takes off, and if the US dollar gets a bit of a pullback in general as it has been extraordinarily strong against multiple currencies, not just the Canadian dollar if the US dollar takes a bit of a breather, that might be reason enough to have this market pullback.

However, if we were to turn around and bounce from here, the market could go looking to take out the C$1.30 level next. If we rally above there, then it is likely that we could go looking to reach the C$1.31 level. A lot of this could be influenced by oil, but it also could be influenced by fear, as the US dollar continues to be the first place people run to when they are concerned. That being said, it is worth noting that this pair does tend to be very choppy as the two economies do so much in the way of cross-border transactions. You can think of this a lot like the EUR/GBP pair, as there is a lot of noise between both of those currencies as well.

If we were to break down below the C$1.29 level, we will more likely than not see a bit of support come into the picture not only at the gap, but also at the 50 Day EMA which is rising at this point and looking to be influential yet again as we have seen it be so many times in the past.

DOT/USD reversed lower after hitting a one month high two days ago, but Polkadot has scratched its way higher again and could attract speculators.

DOT/USD is trading below the 23.0000 juncture as of this writing, but its current value may attract the attention of optimistic speculators. After battling to a mid-term high on the 2nd of April when DOT/USD came within sight of the 23.8000 mark, the cryptocurrency then reversed lower, but again yesterday another attempt upwards was seen only to be pushed down again. However, in early morning trading Polkadot continues to incrementally gain and is within sight of important short term resistance.

The ability of DOT/USD to challenge the 23.8000 level a couple of days ago is intriguing, because it firmly put the cryptocurrency within touching distance of prices that have not been demonstrated since the middle of January. Since stumbling to a low near 13.7500 on the 24th of February, DOT/USD has incrementally been able to produce gains. While the high of nearly 55.5500 seen on the 4th of November 2021 may feel like miles away, price action produced the past month in DOT/USD has been positive.

The broad cryptocurrency market continues to show a change of sentiment may be underway. Yes, there are fresh memories of downward trends and the bearish trajectory to lows seen over the past six months should not be forgotten. However the recent ability of DOT/USD to march in step with the turnaround also being displayed by the major counterparts of Polkadot is enticing.

If DOT/USD can maintain its current stance which has shown strength as it battles in a price range slightly below values seen in the middle of January, this could be taken as a positive indicator. Conservative traders may want to wait for slight downturns in DOT/USD before igniting their long positions, but current price levels do look inviting and stop loss ratios can be constructed near rather close by support around the 22.5500 to 22.4500 levels. Leverage as always should be well defined and used cautiously.

DOT/USD is within sight of important resistance. If Polkadot can muster enough firepower to begin a real test of the 23.0000 juncture and surpass it and begin to touch the 23.25000 mark and sustain buying momentum, traders cannot be blamed for believing January values near the 24.0000 junctures up above are viable near term goals.

Polkadot Short Term Outlook:

Current Resistance: 23.2500

Current Support: 22.3900

High Target: 24.8000

Low Target: 21.5900

Now fears over the logistics of actually distributing the vaccine are taking over the market, which may dwindle the enthusiasm for risky assets.

The last couple of weeks have not been the best for precious metals enthusiasts, as volatility dominated the markets.

So far, gold futures have given up last week’s gains, going down by 4.50 percent. Last week, gold attempted to recover, adding 3.82 percent, mainly aided by the fall of the US dollar which fell by 1.92 percent against a bundle of its main competitors. So far this week, the dollar has been recovering from last week’s losses, as the US Dollar Index climbed by 0.78 percent. Silver futures have also lost ground this week, going down by 5.03 percent and giving up some of last week’s 8.53 percent gains.

The sudden weakness of precious metals could be explained by the optimism that took over the market after Pfizer’s announcement of a coronavirus vaccine, bringing up risk appetite and boosting the performance of risky assets such as stocks. Right now, several countries are in negotiations with Pfizer  to secure doses of the vaccine, which according to the company’s early data is more than 90% effective.

Precious metals were surging since the pandemic began, as the rise of risk aversion across the markets has been pushing traders and investors towards safe-haven assets. Many also fear high inflation, as international central banks are considering imposing negative interest rates and having balance sheets that are hitting record highs.

Those fears are now being reinforced by governments’ decision to provide fiscal stimulus in order to keep the economy afloat, given the pernicious effects of the restrictions that were enacted to stop the spread of the coronavirus. Because of this, governments are currently piling on record amounts of debt, which could have negative effects in the long run, at least according to conventional wisdom.

In any case, the recent victory of the democratic candidate Joe Biden boosted the hopes for additional stimulus in the United States, which at this point is necessary and would have a positive effect in the short and mid terms. Moreover, the fact that the pandemic continues surging around the world signals that stimulus efforts are not ceasing anytime soon.

As COVID-19 continues to spread, it has already infected around 52,564,762 individuals and killed 1,291,785. The United States is the most affected country, with 10,708,728 total cases as well as 247,398 total deaths, followed by India, Brazil, and France. Many countries are considering an additional general lockdown, while others (like the United Kingdom and Israel) have already implemented it. Sweden, once praised for its unique approach, is now also considering additional restrictions given the recent rise in cases.

Now fears over the logistics of actually distributing the vaccine are taking over the market, which may dwindle the enthusiasm for risky assets. This is already affecting the stock market’s performance and could favor precious metals in the near future.

U.S. economic recovery slows; USD loses steam for the second consecutive week.

The United States Bureau of Labor Statistics reported last week that non-farm payrolls stood at 245,000, which is lower than expectations of 469,000 and last month’s 610,000. Average hourly earnings climbed by 4.4 percent in November (year-on-year) while gaining 0.3 percent in monthly terms. The unemployment rate was at 6.7 percent in November, an improvement from the previous month’s 6.9 percent and surpassing forecasts of 6.8 percent.

The sharp deceleration of employment suggests that the US economic recovery may take longer than previously expected. Some analysts found the report disappointing and interpreted it as a sign of economic trouble.

The COVID-19 situation itself does not support optimistic narratives, as cases keep surging. So far, 14,983,425 coronavirus cases have been reported in the United States, as well as 287,825 deaths, making it the most affected country in the world. Hospitalization and deaths recently hit record levels, which may be linked to the recent Thanksgiving celebrations that were held across the country.

Paradoxically, this news was taken positively by the stock markets, as US shares closed in mainly positive territory on Friday. The Dow Jones Industrial Average gained 0.83 percent during the session, closing at the 30,218.26 level, followed by the S&P 500 which gained 0.88 percent during the session and closed at the 3,699.12 level. The NASDAQ 100, which closed at the 12,528.48 level, gained 0.49 percent during the session.

Attention is on the Federal Reserve, which is now expected to boost its bond-purchasing program in an attempt to stimulate the US economy. This idea was somewhat confirmed by Federal Reserve Chairman Jerome Powell’s recent comments about the path that the bank is taking in the near future.

“We are going to keep our rates low and keep our tools working until we feel like we really are very clearly past the danger that is presented to the economy from the pandemic,” he said.

Additional fiscal stimulus is also a possibility. Though negotiations on a new stimulus package are yet to resume, new proposals are now being considered in the U.S. Senate.

Economic Calendar

The markets received important and relevant data about the current state of the US economy.

Among the most relevant reports was the Chicago Purchasing Managers’ Index for November, which signaled an expansion of the business sector across the states of Illinois, Michigan and Indiana. The reading stood at 58.2, below the previous month’s 61.1 and lower than expectations of 59. The Pending Home Sales Index dropped by 1.1 percent, below predictions of a 1 percent surge but better than the previous month’s figure.

Markit Economics reported the Manufacturing PMI on Tuesday, which showed an expansion of the sector but remained below expectations of a steeper expansion and the previous month’s 59.3.

November’s employment change figure was reported on Wednesday, which stood at 307,000, lower than expectations and the previous month’s figure.

The Service PMI was released on Thursday, signaling (again) a slower expansion of the sector with a final reading of 55.9. Expectations were of 56, and the previous month’s reading stood at 56.6.

US Dollar Loses Steam for the Second Consecutive Week

The US Dollar Index, which measures the greenback’s performance against a bundle of its main competitors, lost ground for the second consecutive week and dropped by 1.19 percent. The dollar went down by 0.65 percent last week, which resulted in a drop of 2.31 percent for November.

Many analysts attribute this weakness to the fact that investors are currently rushing towards riskier assets, now that the hopes for a vaccine are high.

Some of these analysts expect this weakness to persist through 2020, as they expect additional monetary stimulus. Others predict that the dollar’s and equity markets’ performance-inverse relationship will remain relevant in the near future.

“We forecast another 5-10% dollar decline through 2021 as the Fed allows the U.S. economy to run hot,” said analysts at ING.

US Economic Data Worse Than Expected

In its last report, the Bureau of Economic Analysis reported that the gross domestic product rose by 33.1 percent in the third quarter (quarter-on-quarter), below expectations of 33.2 percent and after decreasing by 31.4 percent in the second quarter.

Inflation has been low, at least compared to the Federal Reserve’s inflation target. In yearly terms, the Consumer Price Index missed analysts’ expectations, climbing by 1.2 percent in November after an increase of 1.4 percent in the previous month. In monthly terms, the CPI stood at 0 percent, below forecasts of a 0.1 percent increase and lower than October’s 0.2 percent.

As mentioned, the unemployment data turned out to be disappointing, standing at 6.7 percent in November. While this did not meet expectations, it was lower than the previous month’s 6.9 percent.

At the moment, cash rates remain at 0.25 percent. The Federal Reserve’s upcoming cash rate announcement is set to take place on December 16.

Upcoming Events

• On Tuesday, the Energy Information Administration will be releasing its short-term energy outlook.

• On Wednesday, the US Bureau of Labor Statistics will be publishing its JOLTs Job Openings report.

• Also on Wednesday, the Energy Information Administration will be reporting about the Crude Oil inventories level.

• Core CPI data for November will be reported on Thursday, as well as initial jobless claims.

• On Friday, the U.S Bureau of Labor Statistics will be releasing the Producer Price Index.