S&P 500 opened higher on Thursday, shrugging off the 4.4 million Americans who applied for unemployment benefits. But U.S. equities pulled back on reports that Gilead’s coronavirus drug Remdesivir failed in its first trial in China. The S&P 500 finished lower, the Dow inched higher, and the Nasdaq was flat. Oil rose and bonds rallied, pushing 10-Year Treasury yields down to 0.59%. Gold gained 1% and the dollar strengthened against all majors. Elsewhere, Euro Stoxx futures opened with a big swoon in Asia on Friday, something that could swing the mood firmly negative across the equities complex. Whether it is disappointment with the EU stimulus plan or something yet to be revealed, a 2% drop needs watching. Overall, risk appetite today is more risk-off given stronger USD and dipping equity futures.
The dollar went higher against most of its peers on Thursday, benefiting from the risk aversion. Reuters reported a record 26 million Americans sought unemployment benefits over the last five weeks, confirming that all the jobs created during the longest employment boom in U.S. history were wiped out in about a month as the novel coronavirus savages the economy. But the market is not paying attention to that data with USD going higher amid the risk aversion after news that Gilead’s coronavirus drug failed its first trial in China. Against a stronger USD, gold price retraced to $1,722.80, down 0.45% on a day, during the Asian session on Friday. The yellow metal earlier cheered the market’s risk-on sentiment but has failed to keep the gains recently amid mixed news.
Crude oil pared losses in recent sessions on hopes that companies will cut production ultimately to combat the oversupply issues.U.S. operators have already started to shut down manufacturing, aiming to reduce production by 20%. US oil futures for June delivery rose for a fourth day to above $17 a barrel after the May contract fell as low as $-40.32 on Monday before expiring the next day. We are still waiting for progress from the OPEC+ for a further cut to combat this rising inventory in most of the oil hubs and oil tankers.
Copper is on the rise alongside the rebounding crude oil. The prospects for copper seem brighter compared to crude oil, as China continues its economic recovery from the COVID-19. But don’t forget that although domestic consumption could make up for some losses, China’s economic recovery largely depends on how fast the pandemic can be controlled overseas. In a global supply chain world, no country could expand well alone.
Technical & Trade views
USDCAD (Intraday bias: bearish below 1.4164)
We remain bearish as price is approaching 1st resistance, which happens to be where the 61.8% fibonacci retracement is, and price is likely to reverse off 1st resistance towards 1st support..
UKOIL (Intraday bias: bullish above 21.74 neutral below)
We are waiting for the price to break above upside confirmation, which happens to be a confluence level of the horizontal overlap resistance and 38.2% Fibonacci retracement. If price can break above the upside confirmation, more upside is available.
XAUUSD ( Intraday bias: bearish below 1719.95)
We remain neutral waiting for the price to break below the downside confirmation at 1719.95 where the 61.8% fibonacci retracement and horizontal overlap resistance are. If price could break below the downside confirmation, price is likely to drop towards 1st support at 1642.36 where the 38.2% fibonacci retracement and horizontal overlap support are.
XCUUSD ( Intraday bias: bullish above 2.2448)
We remain bullish as price is likely to approach 1st support, which happens to be a confluence level of the 50% fibonacci retracement and horizontal overlap support. Price is likely to go higher towards 1st resistance at 2.3514 where the previous swing high is.
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Desmond Leong runs an award-winning research firm (The Technical Analyst finalists 2018/19/20 for Best FX and Equity Research) advising banks, brokers and hedge funds. Backed by a team of CFA, CMT, CFTe accredited traders, he takes on the market daily using a combination of technical and fundamental analysis.