Trump Makes Way
Risk markets have received fresh upside support this week from news that Donald trump has finally green-lighted transition protocols for the transition to Joe Biden’s administration. Uncertainty linked to Trump’s refusal to concede the presidency and vacate the White House had been stifling markets over recent weeks. With Trump now agreeing to move out of the way, the market can begin to focus on the impact of a Biden presidency. The first item drawing attention is the news that former Fed chair Janet Yellen is likely to be appointed Treasury Secretary. This is good news for the market as Yellen has voiced strong support for enhanced fiscal spending amidst the ongoing pandemic. With this in mind, the market is expected a strong stimulus package from the Democrat president along with plenty of cohesion between the central bank and the government. This is in contrast to the current administration which has often been at odds with the central bank. Just last week, the current Treasury Secretary approved a portion of the Fed’s lending programmes to expire at the end of the year, despite the Fed calling on the need for greater support for the economy as the crisis rolls on.
Risk markets have also been lifted by the recent slate of COVID vaccine headlines. With several high-ranking pharmaceutical companies now declaring their vaccines to be over 90% effective, governments are pushing ahead with regulatory approval in a bid to begin rolling the drugs out by year end, aiming for a return to normality by spring 2021.
The rally in the DAX has taken price above the 12916.11 level and the bear channel top. However, price is currently stalled at the 13322.69 level. Above here, the next level to watch is the 13744.70 level resistance. To the downside, any break back below the 12916.11 level will target the 12290.40 support.
The S&P continues to hover around the 3586 level. Following an initial break above the level on the first vaccine headlines a fortnight ago, the market has yet to hold above the level. To the downside, the next key support is at the 3391.75 level and while above here, the near-term bias remains bullish. It is worth keeping an eye on momentum studies, however, which are currently showing bearish divergence, suggesting room for a correction lower.
The rally in the FTSE has seen price breaking above the bearish trend line from summer highs and also the 6123.3 level. However, the current move has stalled ahead of the major 5618.2 level. The near-term bias remains bullish for now with the 7025.8 level the next target to note.
Following a brief correction lower from the 26213.4 level, the NIKKEI has now turned higher again and is fighting to break above the level. Above here, the next challenge is the retest of the broken bullish channel. To the downside, the next key support is at the 24562.3 level.
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