Asian stocks drifted lower Tuesday alongside U.S. futures as investors weighed the challenges economies face removing restrictions to contain the coronavirus pandemic. New York Governor Andrew Cuomo said businesses including construction, curbside retail, drive-in movies and some recreational activities will reopen this week on a regional basis. South Korea reported a second wave of infections, which dampened the economic outlook when more economies are reopening.
USD went higher on early Tuesday as the market is weighing the challenges faced ahead against the news that more countries are opening up. Gold pared gains on Monday on a stronger dollar. Goldman Sachs Group Inc. warned investors had gotten ahead of themselves and the S&P 500 Index will drop almost 20% in the next three months as a return to economic normalcy is still a long ways away. This triggered another wave of risk aversion back in the market and USD seems to have benefited more than Gold. With the risk aversion escalating, Gold could see more upside.
Copper extended its gains on Tuesday, benefiting from the news that more countries are opening up. On the other side, China’s central bank reported an 11.1% growth of M2 in April, the highest since January 2017. It is a gesture that PBOC is adopting more easing policies to support economic recovery. Copper is likely to benefit from this new wave of the stimulus plan.
Oil drifted higher at the start of the day as signs of recovery continued to surface following further production cuts from Saudi Arabia. Further there were announcements that there would be further easing and gradual re-opening of economies admist the slowing virus growth rate across most countries. While production cuts were welcomed, market observers are pointing out that further cuts are not needed, but rather time for the market to adjust. We see limited upside for oil for today. In line with oil, the CAD looks to outperform against the USD as well.
Technical & Trade views
USDCAD (Intraday bias: Bearish below 1.40704)
Price approaching key Fibonacci retracement level at 61.8% and holding below 1st resistance. A short term drop below 1st resistance at 1.40704 towards 1st support at 1.40046 is expected. Stochastics is testing resistance where price reacted in the past as well.
UKOIL (Intraday bias: Bullish above 28.66)
Price slowly drifting but still holding above 1st support at 28.66 above which a short term bounce towards 1st resistance at 31.12 is expected. Stochastcis is also reacting above support level where price bounced in the past. It is important to note that oil price is also within a larger broad sideways range.
XAUUSD ( Intraday bias: bullish above 1693.50)
We turned bullish as price is approaching 1st support at 1693.50 where the horizontal swing low support and the trendline are. Symmetrical triangle also shows support here at 1693.50. Price is likely to bounce towards 1st resistance at 1710.77 where the 61.8% fibonacci retracement and horizontal swing high resistance are. MACD is also showing bullish sentiment.
XCUUSD ( Intraday bias: bearish below 2.4258)
We turned bearish as price is approaching 1st resistance at 2.4258 where the 78.6% fibonacci retracement and 61.8% fibonacci extension are. Price is likely to drop towards 1st support at 2.2852 where the 50% fibonacci retracement and horizontal overlap support are.