Asian stocks were mixed on Wednesday as investors weighed the recent rally in risk assets alongside evidence of a U.S. economic recovery after the jump in U.S. retail sales. S&P 500 futures slipped back early Wednesday trading after U.S. equities closed higher. Federal Reserve Chairman Jerome Powell said the U.S. economy may be bottoming out but still has a long way to go before it reverses the substantial damage done by the pandemic. After all, the uncertainties in this economic recovery still persist.
The dollar went higher amid the equity rally. The U.S. Treasury yield is almost 50bps more than the average among the G8 currencies. The spread has widened from as little as 13 bps as recently in April. Alongside, the rally of the U.S. stock market is also attracting flows into the U.S.
Copper prices tumbled lower, as weakening demand in China overshadowed investors’ optimism from the Federal Reserve’s announcement to tweak its bond buying program, in a move to support a U.S. economy hit by the COVID-19 pandemic. Elsewhere, investors tread with caution as risk aversion floods back into market with the second wave of Coronavirus infection seen in Beijing, with the Chinese capital lifting its emergency response to level two, indicating that people will have to be tested for the virus before being allowed to leave the city.
Gold prices traded sideways, as downward pressure from a stronger dollar, with risk aversion flooding back into markets over concerns of a second wave of Covid-19 outbreak in Beijing countered demand for the safe haven precious metal. Elsewhere, demand for the metal remains under pressure with a surge in Wall Street driven by a record rise in US retail sales and optimism over a COVID-19 drug. In terms of technical outlook, prices remain under pressure from its descending trend line as well.
Oil prices retreated further as Beijing now declares the 2nd highest state of emergency following a 2nd wave of virus outbreak. Adding on to the drop in oil prices was a report that pointed to further swelling in US stockpiles despite production cuts. The uncertainty surrounding oil prices should see a further dampening of previously positive sentiments. In line with Oil, CAD price remains in a sideways range against the USD, showing indecisiveness.
Technical & Trade views
USDCAD (Intraday bias: bullish above 1.3485)
We turned bullish as price is approaching our 1st support where the 50% fibonacci retracement is. If price approaches 1st support,, it could jump further from here. The Ichimoku cloud is showing bullish momentum.
UKOIL (Intraday bias: Neutral between 41.02 and 39.28)
Oil price holding between 1st resistance at 41.02 and 1st support at 39.28. With technical indicators giving mixed signals, we prefer to remain neutral for now as there is no good level for entry. A break below 1st support should see price fall towards 2nd support. Otherwise, a break above 1st resistance should see price go higher towards 2nd resistance.
XAUUSD ( Intraday bias: Bearish below 1732.947)
Price is facing bearish pressure from our intermediate resistance, in line with our descending trend line and 78.6% fibonacci extension, where we could see a further drop to our first support level, in line with our 61.8% fibonacci retracement and horizontal overlap support. Stochastic is facing bearish pressure from our resistance as well.
XCUUSD ( Intraday bias: bearish below 2.61678)
Price is facing bearish pressure from our intermediate resistance at 2.61678 in line with our horizontal swing high resistance and 50% fibonacci retracement, where we remain bearish below this level and could see a further drop to our first support level, in line with our 127.2% fibonacci extension, ascending trend line, 38.2% and 78.6% fibonacci retracement. Stochastic is facing bearish pressure from our resistance as well.