The US dollar remains steady near the 93 mark, but the treasuries are dumped. The US 10-year yield advanced above 0.71% as capital moves to risky equity markets for better returns.
Capital leaves gold as the risk rally intensifies. The price of an ounce fell to $1914 on Tuesday, as US equities hit new records. The upbeat US sovereign yields encourage selling as well. But dip-buyers are seen near the $1900 mark as the actual risk rally starts feeling uncomfortable in the absence of any additional aid plan from the Fed, or the government.
Meanwhile, the US-China trade talks seem to progress as China reiterates its commitment to reach its phase-one promises despite a lot of political noise around China’s Xinjiang and Hong Kong policies and the tech war. According to the latest news, the two countries would be discussing next steps in trade negotiations, including the protection of intellectual property and obstacles to US financial services and agriculture. But investors prefer to wait and see given the sudden and drastic changes in the tone and the direction of US-China negotiations.
The EURUSD treads water near the 1.18 mark, awaiting a fresh direction from the US dollar. On the other hand, the rising Covid cases across Europe increase the doubts regarding the European recovery trades and provides a stronger case for a softer euro against the greenback. But the dollar bears need to give in to allow a meaningful downside correction in EURUSD. The next negative target stands at 1.1685, the 23.6% Fibonacci retracement on March – August rebound.
Cable continues being bought near 1.3050 and sold past 1.32.
The USDJPY advanced to three-week highs on the back of a stronger risk appetite and outflows from the safe haven yen.
WTI crude jumped to $43.60 per barrel as the Tropical storm Laura strengthened into a hurricane threatening the US refineries along the Texas-Louisiana coast. It is said that the US refineries could lose as much as 12% of their capacity for more than six months. Also, the weekly API data showed a 4.5-million-barrel decline in US weekly inventories, versus a draw of 2.7-million-barrels expected by analysts. Lower supply news should give support to oil prices in the short run, but supply-side news tends to have an ephemeral positive impact on oil prices. The global oil market remains swamped with excess supply and prospects of slow recovery in global demand should cap the upside potential in oil prices approaching the $45 per barrel.
