Daily Commodity Outlook, 6 August 2020

Trading Tips

A rally in Asian stocks faltered Thursday as investors weighed more signs of tension with U.S.- China relations and ongoing negotiations on an American stimulus package. S&P 500 contracts edged up after the gauge rose to within 2% of its record closing high in the wake of encouraging news on the vaccine front. 

The dollar continued the slide. Ten-year Treasury yields stayed near their lowest since March. Pressure is still there on Republicans and Democrats to resolve differences over a new U.S. virus relief package. As the market is expecting an agreement by the end of the week, if the two parties fail to reach an agreement this week, we might see further weakness in USD strength. 

Copper prices remained under pressure as increased output in top producing countries, with Chilean firm Codelco, the world’s top copper producer, reporting a 4.7%-rise year-on-year in January-June, along with a 40.8% jump in the June copper output in Peru as compared to a month earlier limited the upside in prices. Looking ahead, the increase in output of the metal, coupled with a weaker global demand as the economy struggles to recover from the pandemic could put prices under further pressure.  

Gold prices remain on track to continue on its uptrend after surpassing the $ 2000 milestone as a weaker dollar and increasing wariness that the recovery in the stock market might be unsustainable, buoyed demand for the precious metal. Looking ahead, the precious metal is poised for a further rally as it benefits from the low interest rate environment, rising geopolitical tensions and surging number of Covid-19 cases and dips could present an opportunity to buy the safe-haven asset to ride out the pandemic. 

Oil moved a lot but got nowhere despite pushing higher overnight, during the Asian trading session, oil price pulled back and pared it’s gains. It holds steady as crude stockpiles are reported to have declined more than expected. This helped to offset expanding fuel inventories and softer demand. Certain oil experts are saying that this would be a grindingly slow climb for oil as OPEC+ starts to test the market by returning supply against a backdrop of climbing virus cases around the world. The CAD strengthened in line with oil over night however held sideways on mixed market sentiments.

Technical & Trade views

USDCAD (Intraday bias: bearish below 1.3258)

Price is facing bearish pressure from downside confirmation in line with 50% fibonacci retracement where we could see a continuing drop below this level. EMA is also suggesting further bearishness to exist.

UKOIL (Intraday bias: Bullish above 45.08)

Price broke out of the ascending channel to the upside and is currently back to test the channel breakout support. With price holding above moving average,  short term push up above 1st support at 45.08 towards 1st resistance at 46.22 can be expected.

XAUUSD (Intraday bias: Bullish above 2042.92)

Price is facing bullish pressure from our ascending trend line and first support, in line with our 38.2% fibonacci retracement and horizontal pullback support where we could see a bounce above this level to our first resistance target. The Ichimoku cloud is showing signs of bullish pressure as well.

XCUUSD (Intraday bias: Bearish below 2.93065)

Price is facing bearish pressure from our first resistance in line with our 78.6% fibonacci extension, horizontal swing high resistance and 127.2% fibonacci retracement where we could see a reversal below this level. Stochastic is facing bearish pressure from our resistance as well. 

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