Gold and Global Shares Boosted by $2.3 Trillion Bill Signing

Government Shutdown Avoided

by Bogdan Giulvezan 

Monday the markets reacted strongly to the news that President Donald Trump signed a $2.3 trillion bill that will allocate $1.4 trillion to government spending and $900 billion to pandemic relief aid. This comes as a mild surprise, as the President initially threatened to refuse to sign the bill, a fact which triggered a lot of uncertainty during the last week. The signing of the bill also avoids a partial government shutdown (which would have started on Tuesday).

In light of the news, Gold added as much as 1% on Monday and US shares also posted gains, with their EU counterparts likely to follow suit. The US Dollar fell to 89.98 and looks bearish, which is in line with the negative correlation between DXY and Gold.

On the other side of the pond, the European Union and the United Kingdom finally reached an agreement that Prime Minister Johnson called a “good deal for the whole of Europe”. Speaking on the matter, EU Chief Negotiator, Michel Barnier said: “We have now come to the end of a very intensive four-year period, particularly over the past nine months, during which we negotiated the UK’s orderly withdrawal from the EU and a brand new partnership, which we have finally agreed today.

UK and Canadian banks are closed today, due to Boxing Day and the whole week ahead will lack major economic data releases, which is typical for the last trading week of the year. Most banks across the world will be closed on Thursday, December 31, and Friday, January 1st. Moreover, ECB’s Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) will be closed on New Year’s Day, which will have a substantial impact on volatility.

Chart Analysis – DXY

Currently, the US Dollar is trading at 90.02, close to daily lows at 89.98 and it has been on a strong downtrend for almost the entire year. The first support is located in close vicinity, at 89.80 and the probability of a touch is relatively high considering the way the US Dollar has been behaving lately but this doesn’t exclude potential moves north until that target is reached.

Upside movement should be capped by the resistance at 91.00, at least for the remainder of the year but a breakout could trigger an extended move up, which would have the 100 periods EMA as a target. However, such an ample move would take a longer time to develop.

Considering the irregular volatility generated by the end of the year, an accurate prediction is difficult and it’s best that you use more caution than usual.