Asian stocks climbed Tuesday on expectations the Federal Reserve will reinforce its dovish message this week and as U.S. stimulus talks got underway. S&P 500 rebounded on Monday with technology stocks leading the gains. Asian stocks surged thanks to a continuing rally in Taiwan Semiconductor Manufacturing Co.
USD stabilized as investors were betting on the Fed Chairman to stay dovish to support economic weakness. The market is also expecting the Fed to keep the QE going at least for this year going forward. At the same time, U.S. lawmakers are continuing efforts towards the next fiscal stimulus. Senate Republicans presented the $1 trillion proposal as a first step toward negotiating a compromise with Democrats, who’ve offered their own $3.5 trillion plan.
Copper prices edged higher buoyed by an increase in market risk appetite, following U.S. Senate Republicans proposal of a $1 trillion coronavirus aid package a day earlier. Elsewhere, the news also sent USD tumbling lower to a fresh two-year low, the dollar-denominated metal more attractive for buyers using other currencies.
Gold prices reached a historical high at the start of the week, as the surging number of Covid-19 numbers, along with sinking yields, mass stimulus and liquidity buoyed demand for the safe-haven asset, as it is often used as a hedge against currency debasement and inflation. Elsewhere, the weakness in USD also contributed to the remarkable rally as the rising number of Covid-19 cases in the U.S dampened hopes of a quick economic recovery.
Oil prices edged slightly lower at the start of the Asian trading session as market speculators are guessing that the Federal Reserve will continue to keep the US interest rates near zero coupled with the fact that the fundamental drivers behind crude prices seems to be getting shakier. At the same time, the global benchmark for crude starting showing signs of contango. The widest since May. This is when the nearer dated contracts are cheaper than later ones. Showing a bearish signal for oil prices. In line with this, CAD also underperformed against a weakened USD, showing that oil prices are not going to head up anytime soon.
Technical & Trade views
USDCAD (Intraday bias: bearish below 1.3363)
We turned bearish as price is testing our downside confirmation where 61.8% fib extension is. Price is likely to drop further from the level towards 1st support if price breaks below. MACD also indicates bearishness.
UKOIL (Intraday bias: Bearish below 43.76)
Oil drifted sideways. With technical indicators giving mixed signals, and price holding between 1st resistance at 43.41 and 1st support at 42.84 and no good levels for entry, we prefer to remain neutral for now.
XAUUSD (Intraday bias: Bullish above 1941.31)
Price is facing bullish pressure from our ascending trend line and first support, in line with our 78.6% retracement and horizontal pullback support, where we could see a bounce above this level. The Ichimoku cloud is showing signs of bullish pressure as well.
XCUUSD (Intraday bias: Bullish above 2.86093)
Price is facing bullish pressure from our ascending trend line and first support, where we could see a bounce above this level. Ichimoku cloud is showing signs of bullish pressure as well.