Daily Commodity Outlook, 4 August 2020

Trading Tips

Asian stocks advanced Tuesday after a technology-fueled rally in the U.S. amid positive economic data and the potential for further stimulus. The dollar held gains. S&P 500 contracts were little changed. Earlier, the Nasdaq 100 reached a record as traders sought out companies poised to do best in a stay at-home economy. 

The dollar held gains after rebounding following its worst July in a decade, and Treasuries maintained losses after data showed U.S. manufacturing expanded in July at the fastest pace since March 2019. At the same time, tensions between the U.S. and China continue to simmer. Trump said TikTok will have to close its U.S. business by Sept. 15- unless there’s a deal to sell its American operations.

Copper prices pared recent losses yesterday, as it continued to trade within a range for weeks, with investors weighing the bullish and bearish factors, following a strong rally in the past few months. Looking ahead, we caution the limited upside in prices, as escalating Sino-US tensions, resurgence of COVID-19 cases and a seasonally weaker demand from China could dampen the market’s risk sentiment. Elsewhere, a weakening dollar could provide some support in the recent rally, boosting demand for dollar-denominated metal as they are now cheaper to import using other currencies. 

Gold prices remain on track to continue its uptrend after taking a breather on Monday from its huge rally, reaching a historical high in July. This was attributed to the weakness in Dollar, as the Fed committed to keeping benchmark interest rates near zero until the economy starts to recover from the pandemic. Looking ahead, the surging number of Covid-19 cases and rising geopolitical tensions are likely to boost demand for the safe-haven metal. 

Oil edged lower at the start of the Asian trading session as investors took into account additional OPEC supply hitting the market sometime this month. OPEC’s crude output rose towards the end of last month, led by Saudi Arabia ahead of the group and its allies relaxing its historic cuts this month. Further, important to note is that the futures curve is showing the widest contango since May (Contango is when the current price is much lower than the forward price). This shows that the short term outlook for oil doesn’t look too bullish. In line with oil prices, the CAD underperformed against the USD.

Technical & Trade views

USDCAD (Intraday bias: bullish above 1.3381)

Price is facing bullish pressure from our first support, in line with our 61.8% fibonacci retracement, and horizontal overlap support, where we could see a bounce towards 1st resistance where the horizontal swing high is. 

UKOIL (Intraday bias: Bullish above 43.68)

Price pulled back from a recent high and came close to testing 50% Fibonacci retracement support level and 1st support at 43.68. With MACD above 0, there is still a possibility of further bullish momentum where we could see a bounce above 1st support towards recent high and 1st resistance at 44.42.

XAUUSD (Intraday bias: Bullish above 1971.74) 

Price is facing bullish pressure from our ascending trend line and intermediate support, in line with our 38.2% fibonacci retracement and horizontal swing low support, where we could see a bounce above this level. A break above our upside confirmation level could provide the bullish acceleration to our first resistance target. The Ichimoku cloud is showing signs of bullish pressure as well.

XCUUSD (Intraday bias: Bearish below 2.93167)

Price is facing bearish pressure from our first resistance in line with our horizontal swing high resistance, 78.6% fibonacci retracement and 78.6% fibonacci extension, where we could see a reversal below this level. RSI is facing bearish pressure from our descending trend line as well. 

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