Vaccine Trail Halts, Stock Futures Vulnerable | More Pain Ahead For Sterling
U.S. futures are swinging between gains and losses as traders have shown their concern due to a possible delay in the Covid-19 vaccine. This comes on the back of the news that one of the person who was involved in the coronavirus vaccine by AstraZeneca became ill. The company has paused its vaccine trial, and this has raised alarm bells on two aspects.
Firstly, there have been safety concerns. This is because we have never ever seen a vaccine becoming available this quick in vaccines' history. It usually takes years for a vaccine to become available as pharma companies need to ensure that a vaccine is 100% safe. Finally, if we hear another similar news by other companies that are in their final stages of testing the vaccine, they will also have to pause their trail.
This means that all this optimism that we have seen in the market about the availability of vaccine is likely to fade away rapidly. If this does take place, it means a lot of pain for the hospitality sector. Airline and pharma stocks are likely to get beaten up really badly.
Finding the Floor
As for the tech stocks, the rout continued over in the U.S. There is no doubt in saying that the U.S. tech sector led the coronavirus stock market rally and it is this sector that is making many investors nervous. The question which is on everyone's lips is if we are going to see more of it or if this is a bottom.
The Nasdaq index has experienced three days of intense selloff, and it has reached its 50-day simple moving average on a daily time frame. If the price doesn't bounce from here, then it means more pain for tech stocks.
Sterling Took More Beating
In the currency market, the Sterling took some serious beating yesterday. This was chiefly due to the prime minister's reckless behavior, Boris Johnson, who has indicated to the E.U. that he is ready to walk away from a Brexit deal. The entire situation is so frustrating that the U.K. government's top lawyer has resigned. He is no longer going to help the government in the Brexit withdrawal agreement.
Johnson Wants To Back Paddle
Mr. Johnson wants to back paddle from the original Brexit draft agreement, which literally took an eternity to put in place. No one wants to go through the same pain again. However, this could be one of Boris's strategies to throw the E.U. off balance and get things his way. But for the time being, the only thing that he is achieving is more pain for Sterling and top members of his team, leaving the team in utter frustration.
U.K. leaving the E.U. is a process that is full of pain, and unfortunately, the policy markers with their reckless behavior are only making the matter more arduous. There is no doubt that the U.K.'s economy is going to bear the brunt of the pain in the coming years, even if we leave the E.U. with a deal. Leaving the E.U. without any deal is simply a disaster. Having said this, matters aren't going to much different for the E.U.; hence it is in both parties' interest to form a deal and depart on good terms.
Sterling-Dollar Below 1.30
The British pound has broken the critical support of 1.30 against the dollar, and currently, it is trading at 1.2971. It is highly likely that there is still more pain ahead for the currency. It is important to note that the GBP/USD was trading at 1.34 last week, the currency selloff is intense, and the move is like a falling knife. This means that the RSI is showing an oversold signal on a daily time frame. It is likely that we may see a mean reversion trade. But for now, the path of the least resistance is skewed to the downside, and this means more pain is ahead for sterling. If the Brexit situation continues like this, the Sterling-dollar pair can easily fall to 1.25.
More Pain For Oil
Oil prices also experienced a heavy selloff yesterday, and both Brent and Crude Oil broke some important levels. Brent is trading below the $40 mark, and given the concerns around halting the research of a potential vaccine, it is likely that Brent may continue its move to the downside. The immediate support could be near the $35 mark. As for Crude Oil, tomorrow, we have the Crude inventory data. The event is likely to bring higher volatility for the Crude. The immediate support level is at $35 and a break of this is likely to open the floor for its support level which is near $30