(22 JUNE 2020)DAILY MARKET BRIEF 2:Hesitation hint at weakening risk appetite.
Demand in US treasuries and the dollar remains firm as we see a pause in the rising trend across the global equity indices. The US 10-year yield stands below the 0.70% mark. The yen and the Swiss franc continue collecting the safe haven inflows.
Gold shortly jumped to $1758 per oz on the back of an intense risk sell-off in Asia. If the investors sentiment deteriorates, the yellow metal could finally make the much-expected breakout to the $1800 mark. Otherwise, we should see a consolidation to $1725/1750 area.
The EURUSD will likely extend weakness to 1.1160, the major Fibonacci 38.2% retracement on April – June rebound. The golden cross formation on the daily chart (50-day moving average crossing above the 200-day moving average) should boost short-term tactical long positions and throw a floor under the euro weakness. The latest CFTC data confirmed a peak in long speculative positions in euro last week, meaning that investors remain firm on their long euro view. But the latter also carries the risk of a rapid unwind if the market sentiment deteriorates, as the euro’s moves are mostly coupled with risk assets’ at the moment. Technically, a slide below 1.1160 could mark the end of the actual bullish trend and encourage a further downside correction toward 1.1025, the 200-day moving average.
Cable rebounded to 1.24 after retreating to 1.2335 early in Asia. Sterling owes its recent strength to a globally weaker US dollar. Moving forward, a significant reversal in USD appetite could easily pull the rug from under the feet of sterling and encourage a slide toward the 1.22/1.20 region.
Appetite in oil remains resilient to the investor mood swings. WTI crude tests the $40 offers per barrel on the back of improved demand/supply dynamics. But the overall hesitation in risk assets could also weigh on the positive momentum above the $40 mark.
By Ipek Ozkardeskaya
