Asian stock markets dropped and bonds were in demand on Thursday as worries grew about the second wave of coronavirus infections. Earlier on Wednesday night, Federal Reserve Chair Jerome H. Powell gave a dire warning Wednesday that the U.S. economy could become stuck in a painful multiyear recession if Congress and the White House do not authorize more aid to address the coronavirus pandemic’s economic fallout. This added on to the risk-off sentiment that is back to dominate the market.
USD was little changed on Thursday. Although Powell makes it clear that negative rates are not an option for the Fed, Traders held onto bets that the Federal Reserve will drop rates below zero next year. Implied rates on fed funds futures contracts show the central bank’s policy benchmark dropping below zero by the second quarter of 2021, little changed from before Powell’s comments. Despite a risk-off trading environment over the days and flat USD, gold has not been able to break out of recent triangle patterns. Resistance is seen near a downward sloping trend line that comes in near 1,719.
Copper prices eased on Wednesday on fears of a second wave of coronavirus infections in top metals consumer China and in South Korea. New infections have been reported in the last two weeks in China and South Korea, leading to fresh restrictions to control the spread. Investors are also worried about if this second wave could happen to other countries that are about to open soon, which in that case, will indicate severe demand destruction for copper.
Oil prices hovered and moved sideways above its support level. This price movement showed that there was much hesitation in the markets. This is possibly due to conflicting signals of an early recovery in the oil markets offset by economic warnings coming from multiple central banks globally. Further, OPEC also gave a bleak assessment of the global oil markets for the 2nd quarter of 2020 despite member countries implementing deeper production cuts. This mixed sentiment was also mirrored in the CAD as we see that the CAD drifted sideways against the USD despite holding near key resistance levels.
Technical & Trade views
USDCAD (Intraday bias: Bearish below 1.41156)
USDCAD currently testing ascending channel resistance at 1.41156. With stochastics testing resistance as well, a short term drop below 1st resistance towards 1st support at 1.40163 is expected. 1st resistance also finds confluence with a key Fibonacci extension level at 100%.
UKOIL (Intraday bias: Bullish above 28.66)
Price drifted sideways and is still holding above 1st support at 28.66. As long as price holds above 1st support, a short term bounce towards 1st resistance at 30.67 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: bearish below 1719.95)
We turned bearish as price is approaching 1st resistance where the horizontal swing high joins the 88% fibonacci retracement. Price is likely to reverse off 1st resistance towards 1st support. MACD is also showing bearish pressure is coming.
XCUUSD ( Intraday bias: bullish above 2.2852)
We turned bearish as price is approaching 1st support where the 50% fibonacci retracement and 127.2% fibonacci extension are. Price is likely to bounce towards 1st resistance at 2.4237 where the 78.6% fibonacci retracement and 61.8% fibonacci extension are.