Risk sentiment remains well supported over positive COVID-19 drug trial update and strong hopes for economic recovery.
Summary: Wall Street yesterday closed on a positive note as hopes for economic recovery led by the start of the US Fed’s bond purchase program (covid-19 stimulus package), and positive data helped improve market mood. Following cues from Wall Street, the Asian market also saw major indices and key equities trade and close on a positive note today. Increased positive hopes surrounding drug trials in the USA also aided risk sentiment in Pacific-Asian market hours to some extent.
The European market opened on a positive note today as risk sentiment remained highly positive in global and local markets led by strong hopes of economic recovery and international cues. While gains were limited to a certain extent over worries of new lockdown rules in China over the renewed COVID-19 outbreak, hopes for more stimulus measures from the USA underpinned broad market hopes for economic recovery, offsetting any dovish factors that loomed in the market during the intra-day activity.
Precious Metals: Rare metals continue to trade mixed within familiar price levels. While silver trades positive, gold remains in red as news of new successful drugs to treat covid-19 patients and start of fed support program underpin risk sentiment and hopes for economic recovery.
Crude Oil: Crude oil price retreated from previous session gains as OPEC mentioned that data shows a massive build in crude oil stockpile, which is difficult to offset despite exhaustive production and supply cut measures taken by OPEC+ members and slowly recovering crude oil demand. However, neither Brent nor WTI benchmarks suffered a major meltdown over this update. For now, the focus remains on US weekly crude oil stockpile update while oil price moves within familiar levels.
DXY: US Dollar index remains unchanged for the most part, but it continues to edge its way upwards as caution in the market allowed USD bulls to claw its way up today. While broad market tone remains risk on, lingering caution over renewed geopolitical tensions stemming from Asia keeps USD underpinned, allowing the index to test 97.34 mark today.
On The Lookout: As the fed support program made its strong debut, the global equity market showed a visible change in market mood and price activity. However, there are a lot of factors to take into considerations as the trading session moves into the latter half of the week. Fed Chair Powell made it clear during his testimony yesterday that major economic changes are unlikely to happen anytime soon. Still, hopes remain strong as the Fed bond-buying program is expected to boost global economic activity to some extent. The UK revealed the news of successful drug trials on covid-19 victims with Dexamethasone showing a high level of success in saving patients’ life.
However, Chinese lockdown restrictions continue to tighten as authorities are trying to prevent another case of an extreme covid-19 outbreak. Geopolitical tensions in the Asian continent are red hot as major powerhouses China & India face military standoff. At the same time, the tension between North and South Korea also seems to be building up. On the release front, the US calendar sees Building permits data, EIA weekly crude oil inventories update, and Housing starts data. In contrast, the Canadian calendar sees the release of the CPI update.
Trading Perspective: US futures trading in the international market was positive as risk sentiment supported by hopes of economic recovery kept bulls underpinned. Cues from the international market and broad market investor tone suggest Wall Street is set to open on a positive note. Still, the focus remains on President Trump and his team as he seems to be preparing for another tiff with WTO officials.
EUR/USD: The pair is trading with clear dovish bias today despite improved risk sentiment in the broad market as fears of renewed covid-19 outbreak keeps USD firmly supported. But strong fundamentals surrounding the EURO keeps price steady above 1.12 handle at the moment. Traders now await US macro data for short term profit opportunities.
GBP/USD: The pair is trading with mostly flat within familiar price range but displays bearish tinge as firm USD prevents pair from reclaiming 1.26 handle for now. However, news of successful covid-19 drug trials from the UK keeps GBP underpinned, allowing pair to remain firm above 1.25 handle. Traders now await US macro data for short term profit opportunities.
USD/CAD: The pair trades flat but shows directional cues in favour of US Greenback as USD remains firm in the global market while CAD suffers from a decline in crude oil price led by OPEC update. Build-in US weekly API crude oil inventory data also weighed CAD bulls. Traders now await the US and Canadian macro data for short term profit opportunities.
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