Asian shares went higher on Wednesday as the global risk-on relay continues. Kospi led the rally in the Asian equity market on the back of Korea’s third fiscal stimulus. China’s Caixin Services PMI came in this morning better than expected and is indicating the service sector has rebounded back into expansion in May. Nasdaq futures are approaching the record high as risk assets advance with tech names outperforming the broad benchmark.
The dollar continued the slide on Wednesday as the market is still cheering the risk-on sentiment. The risk-on rally in the global equity market adds on to USD’s weakness. Attention now turns towards the US ISM Services PMI and Factory Orders data for further incentives while risk trends will continue to have a major bearing on the spot.
Copper prices recorded nearly a 3 months high, as China, one of the world’s top metals consumers continues to recover. However, investors remain cautious and gains were limited as tensions continue to linger between the US and China. According to Reuters, demand is recovering with domestic investment booming, especially in infrastructures. Elsewhere, supply and transport slowdowns from South America are also supporting the copper prices.
Gold prices edged lower amid the risk-on Asian session on Wednesday. Recent market optimism seems to have weighed on the precious metals performance as headlines from the US are rekindling investors’ optimism. One of the key drivers that propped the market risk sentiment higher would be US President Donald Trump’s step back from the threat of using more military power to tame the protests. Elsewhere, cautious optimism by the key US medical professional, coupled with the reopening of economies in Europe could have contributed to the risk on session as well. With that in the backdrop, the US 10-year Treasury yields gain 1.8 basis points (bps) to 0.697% whereas stocks in Japan, Australia and China also flash gains during the initial hour of trading.
Oil edged higher as the market looks on in anticipation to see if OPEC and allies will further extend their production cuts. With riots across the US still happening and fear of a 2nd virus wave still on the horizon, any effects on markets recovering have yet to be seen. Market observers are saying that if the oil coalition can agree on a further 3 month output cut, there would be a real chance that the market could flip from a supply glut to a supply deficit and end up pushing oil prices higher. The CAD rose in line with oil and strongly outperformed a much weaker USD.
Oil prices rose higher as further production cuts from OPEC+ coalition now seemed more certain. Russia was reported to have agreed to a 1-month extension of the agreement. Moreover, the American Petroleum Institute reported that stockpiles at the famous Cushing storage hub fell by yet another 2.2 million barrels from last week. However, certain market observers are saying that the rise in prices could be muted as the markets are already pricing in the OPEC+ agreement, so that there is limited upside. CAD strengthened in line with oil prices as well however in the middle of the Asian trading session, the CAD seemed to have lost it’s momentum.
Technical & Trade views
USDCAD (Intraday bias: bullish above 1.3482)
We turned bullish as price is bouncing from our 1st support where the 100% fibonacci extension is. Price is likely to bounce here towards our 1st resistance where the 38.2% fibonacci retracement is. Stochastic also shows upside pressure.
UKOIL (Intraday bias:Bullish above 39.72)
As expected, oil prices climbed higher and surpassed previous resistances. With price holding above moving average, a further push up above 1st support at 39.72 towards 1st resistance at 41.42 is expected.
XAUUSD ( Intraday bias: bullish above 1713.502)
Price is approaching our first support, in line with our 78.6% fibonacci extension, 61.8% fibonacci retracement and horizontal overlap support where we could see a bounce above this level to our first resistance level. Stochastic is approaching support as well.
XCUUSD ( Intraday bias: bullish above 2.47812)
Price is facing bullish pressure from our ascending trend line and support level, in line with our 61.8% fibonacci extension, 61.8% fibonacci retracement and horizontal overlap support where we remain bullish above this level and could see a bounce to our first resistance level. Ichimoku cloud is showing signs of bullish pressure, in line with our bullish bias.