(25 JUNE 2020)DAILY MARKET BRIEF 2: Gold is down after a peak to $1780

Gold is down after a peak to $1780 per oz on Wednesday, as investors simultaneously liquidate their gold holdings along with their risky positions. But risk averse investors will likely dare to open fresh long positions for a further advance toward the $1800 mark to hedge against a further turmoil in the market. The downside should remain capped near the $1750/1720 area (former resistance turns support / 50-day moving average).

The EURUSD shifts lower on the back of a deterioration in global risk appetite and firmer US dollar. But there is room before ringing the alarm bell. From a technical standpoint, the EURUSD will remain in the bullish trend above 1.1160, the major 38.2% Fibonacci support on April – June rebound.

Cable is preparing to extend gains below the 50/100-day moving average zone, 1.2415/1.2400.

WTI retraces below the $38 per barrel on the back of rising US inventories and weakening demand prospects on the back of the IMF’s downside revision to its global growth forecast. Losses could extend to $35 and below if the global risk sell-off were to intensify.

The USDCAD struggles to keep its head above the 200-day moving average but weakening oil prices and stronger US dollar weigh on the Loonie. In addition, Fitch downgraded Canada from AAA to AA+ pointing at the deterioration of public finances after the Covid-19 which should lead to a significant increase in the country’s debt-to-GDP ratio to 115% in 2020, from 88.3% printed a year earlier. News is bad, but not shocking as most developed nations are expected to expand debt above the 100% threshold, if it is not done yet.

Elsewhere, the Central Bank of Turkey is expected to cut its one-week repo rate by 25 basis points to 8% at today’s monetary policy meeting. The lira is faced with an increased selling pressure. Even though the recent decline in inflation allows the bank to lower its rates, the swift recovery in oil and energy prices and post-Covid jump in demand warns that the country may face a dangerous rebound inflationary pressures, which would leave both the central bank and the Turkish lira on the backfoot.

By Ipek Ozkardeskaya