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Wall Street, Gold Prices Rise as US Dollar Sinks Despite 2008-Low GDP

Wall Street, Gold Prices Rise as US Dollar Sinks Despite 2008-Low GDP

2020-04-29 23:00:00
Daniel Dubrovsky, Analyst
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Wall Street, Gold Prices, US Dollar, Fed, Earnings, Gilead Sciences – Asia Pacific Market Open

  • Wall Street saw best day on average in over 3 weeks despite US GDP drop
  • Virus drug trial, Federal Reserve and tech earnings fueled the risk-on tone
  • US Dollar depreciated as anti-fiat gold prices rose, AUD/USD could climb

Wall Street Soars, Gold Prices Follow and US Dollar Sinks

My Wall Street Index – averaging the S&P 500, Dow Jones and Nasdaq Composite - soared in its best day in over 3 weeks as gold prices followed and the US Dollar depreciated. This was also during a day in which growth in the world’s largest economy contracted by -4.8% q/q in Q1. That was the sharpest decline in output since the 2008 financial crisis and economists are broadly anticipating a steeper dropoff in the second-quarter.

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A combination of coronavirus drug trial bets, the Federal Reserve and upbeat tech earnings might have played key roles in financial markets on Wednesday. Gilead Sciences reported on positive data from the National Institute of Allergy and Infectious Diseases’ trial on the antiviral drug Remdesivir. This followed last week’s relatively disappointing update on the drug.

Meanwhile the Federal Reserve left rates unchanged as Chair Jerome Powell hinted at providing further stimulus “aggressively if necessary”. The central bank’s decidedly dovish tone may have helped counterbalance policymakers fading expectations of a V-shaped recovery. Further gains in stocks helped propel the sentiment-linked Australian Dollar and similarly-behaving New Zealand Dollar higher.

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The S&P 500 and Dow Jones closed +2.66% and +2.21% higher respectively, but some stocks continued rising in afterhours trade. In particular, Microsoft, Facebook, Qualcomm and Tesla shares soared and compounded the “risk-on” tilt heading into Thursday’s session after relatively upbeat earnings data. Weakness in the USD likely offered a boost to anti-fiat gold prices – see chart below.

US Stocks and Gold Soar as US Dollar Sinks After Fed Rate Decision and Tech Earnings

Wall Street, Gold Prices Rise as US Dollar Sinks Despite 2008-Low GDP

Chart Created in TradingView – Wall Street Index Averages: S&P 500, Dow Jones and Nasdaq Composite

Thursday’s Asia Pacific Trading Session

S&P 500 futures are pointing higher ahead of Thursday’s Asia Pacific trading session. That may continue boosting the Australian Dollar at the expense of the anti-risk Japanese Yen if regional bourses echo Wall Street’s progress. AUD/USD may see some near term noise on incoming Chinese PMI data. The Aussie’s broader trajectory may continue being shaped by overall market mood rather.

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Wall Street Technical Analysis

On the 4-hour chart, my Wall Street Index has invalidated the Rising Wedge bearish chart pattern. Instead, prices have taken out key resistance at 12094 and are attempting to find follow-through. That has exposed peaks from March. In the event of upside confirmation, this could spell a cautiously bullish bias for US equities on the whole. Rising support from early April – red line – may maintain the upward trajectory in the event of an immediate turn lower.

US 500 BEARISH
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Change in Longs Shorts OI
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Weekly 4% -4% -2%
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Wall Street Index – 4-Hour Chart

Wall Street, Gold Prices Rise as US Dollar Sinks Despite 2008-Low GDP

Chart Created in TradingView – Wall Street Index Averages: S&P 500, Dow Jones and Nasdaq Composite

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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