Disappointing data and geopolitical tensions weigh down risk sentiment. But easing lockdown woes to prevent Wall Street from suffering a major loss.
Summary: Major indices and key equities across both Asia and Europe are on the watch as investors are beginning to look at the bigger picture in the long term amid confusion surrounding lockdown easing measures. China-U.S. tensions continue to remain fresh as arguments continue to heat up, with each party blaming the other side.
In the European market, major indices and key equities open on a flat note as investor sentiment in the market displayed a high degree of caution over geopolitical tensions, mixed earnings, and COVID-19 woes. While Germany and Spain are working to ease lockdown measures following Italy, other major European markets continue to exercise strong preventive measures and lockdown formalities to prevent further escalation in the COVID-19 pandemic.
Precious Metals: Silver is trading positive amid escalating caution, given its status as a relatively cheaper and stable safe-haven asset. But mixed cues in the market have caused the price of gold to remain trapped within a short, familiar price range around $1700 handle with the headline and data-based cues causing the price to fluctuate between $1690-$1710 price ranges.
Crude Oil: Crude Oil price is seeing range-bound activity with dovish bias. Both major benchmarks Brent and WTI, along with their futures, lost most of their gains as weekly data from US API inventory continues to show a massive build in the stockpile. But the decline was prevented from turning into a meltdown as traders wish to wait for some more time to see the impact of OPEC production and supply cut measures which went live last Friday and how it impacts overall demand.
DXY: US Dollar Index is back above the 100 mark yet again as broad-based caution keeps Greenback bulls fundamentally supported to a great extent. While local headline based cues help currencies recover every now and then, USD holds firm, preventing its six major rival currencies from across the globe into entering a phase of positive breakout price rally.
On The Lookout: Despite lack of evidence on its accusations, US President Trump continues to blame China for the COVID-19 outbreak and uses tariff threats causing great fluctuation and volatility in the price of major financial assets. In response, Chinese officials have blamed the USA for using tariff threats to disrupt its citizens’ attention from the major issue of improper COVID-19 management. China blames the USA on its lack of proper response to pandemic resulting in the USA becoming the largest victim for COVID-19 far surpassing other major countries such as China – the ground zero, Italy, or Spain.
While various US states have announced intentions to re-open their market and economies, various risk-monitoring bodies have warned against the move. This is as a result of continued escalating victim count in the nation, which is highly contradicting President Trump’s claims of the pandemic peaking in the country. On the macro data release front, the US calendar sees the release of ADP Non-Farm Employment Change and EIA inventory data.
Trading Perspective: Wall Street is set to see a flat opening as non-farm employment change data, which was released ahead of North American market hours, saw worse than expected outcome. The cues from US macro data along with broad market caution caused US futures in the international market to lose gains from the early intra-day activity, which supports the possibility of dovish opening.
While Sino-U.S. tensions are also a cause of worry to traders, optimism surrounding lockdown easing measures in the USA is likely to prevent major Wall Street indices from suffering a sharp dovish blowout. On the earnings front, Wall Street will see the release of quarterly data from Apache, Lincoln National, Royal Caribbean Cruises, Everest, Discovery, Jacobs Engineering, Century Link, Atmos Energy, Fox Corp, General Motors, Equinix, T-Mobile US, and PayPal Holdings Inc.
EUR/USD: The pair continues to edge lower as the cautious tone in the market caused EURO bulls to lose fundamental support. Worse than expected EU area retail sales update, German factory orders weighed down Euro while firm USD added pressure, causing pair to fall below 1.08 handle. But disappointing US payroll data has helped price bound back above 1.08 handle. The pair will now oscillate around 1.08 handle while traders await headlines from the USA for short term trading cues.
GBP/USD: The pair saw a sharp decline with price action as GBP came under huge pressure over disappointing construction PMI data. The pound is already suffering from Brexit and Covid-19 pandemic woes. Worse than expected gave a major blow to Pound bulls while USD gained on broad market caution. Price action has stabilised around mid-1.23 handle for now over disappointing US macro data that capped decline. Traders now await headlines from the USA for short term trading cues.
USD/CAD: The pair is trading with clear positive bias as US Greenback remains underpinned by broad market cautious tone. A sharp decline in the crude oil price, which ate away at the previous session’s gains weighed down CAD considerably, causing the price to move above the 1.41 handle. But the rally was capped slightly below the 1.415 handle as US payroll data disappointed. Traders now await US headlines for short term profit opportunities and directional cues.
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