In the FX, stronger demand in US treasuries and the dollar should lead to a decent profit taking in most majors which have surfed the weaker USD wave over the past weeks.
Having pulled out the minor 23.6% Fibonacci retracement on April – June rise, the EURUSD could extend weakness to 1.1160, the major 38.2% retracement, which should distinguish between the actual positive trend and a medium-term bearish reversal.
The stronger US dollar will likely throw Cable below the 100-day moving average (1.2455). Meanwhile, the latest CFTC data suggest that the net short speculative positions in sterling continue rising as a sign of a stronger selling pressure in the foreseeable future. Looking at the historical data, the market could easily absorb a further increase in sterling short positions as a result of increased no-deal Brexit bets. On Thursday, the Bank of England (BoE) is expected to leave rates unchanged but step up its asset purchases by 150 billion pounds.
WTI crude plunged 4% on Monday to $35 per barrel. The sales could accelerate as the prospects of a global recovery in oil demand are being dashed by worries of a second wave contagion. If this is the case, an extended period of travel restrictions and slower industrial activity could send the price of barrel down to $20 level.
By Ipek Ozkardeskaya
