Is The Stock Market Recovery Sustainable?

Following yesterday’s major sell-off on Company foreign exchange trading platformWall Street, investor sentiment improved gradually on Wednesday, with European stock indexes trading in the green territory. In contrast, US stocks opened higher, with the tech-heavy NASDAQ adding nearly 1.5% after a plunge of 4% in the previous session.

Interestingly, equities in Europe turned positive despite the halting of Russian gas supplies to Poland and Bulgaria. According to a recent report, the Bulgarian energy minister confirmed that Gazprom (OTC:OGZRY) has halted physical gas flows to Bulgaria. Meanwhile, four European gas buyers are said to have already paid for supplies in rubles.

As worries about the global growth outlook continue to persist, stock markets look unlikely to see a robust ascent in the near term, and risk aversion could reemerge after a short-lived technical bounce. Adding to downside risks, geopolitical tensions surrounding the Russia-Ukraine conflict continue to rise. Earlier this week, Russia warned of immediate proportional response if the UK continues its ‘direct provocation’ of Ukraine.

As such, the safe-haven US dollar exceeded the 2020 peak of 103.00 after a pause to north early-2017 highs around 103.10 before retreating slightly as traders opted to take some profit amid improvement in risk sentiment across the financial markets. However, the downside potential for the US currency remains limited, with bullish risks persisting despite the overbought conditions ahead of a widely expected rate hike by the Fed next week.

Elsewhere, gold prices struggle below the $1,900 mark, being pressured by USD bulls. The precious metal now threatens the $1,880 zone that capped the decline earlier in the day. Should the bullion fail to hold above this immediate support zone, the prices may derail the slightly ascending 100-DMA for the first time since early February. A break below this moving average, today at $1,874, would mark further deterioration in the near-term technical picture.

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