Daily Commodity Outlook, May 11 2020

Trading Tips

Asian stocks saw modest gains in early trading Monday and the yen retreated after a number of countries reported the fewest deaths from the coronavirus since March. Crude oil fell. Futures on the S&P 500 fluctuated after the index gained on Friday even in the wake of a historic surge in American unemployment. Japanese, Korean and Australian stocks edged up. France, Italy and the U.K. all reported the fewest deaths since March, though South Korea warned of the risk of a second wave of infections. Treasuries ticked lower.

Gold is still extending gains on a weaker dollar. The speculation on the negative rate is keeping a cap on USD strength. Fed funds futures contracts extended their rally from earlier this week and prices for early 2021 contracts surged above 100, a level that marks the boundary to negative interest rates. Another supporting factor will be currency debasement brought along by global QEs. The recent huge stimulus plan from most central banks also raises the inflation risks, which lead to gold’s appreciation. 

Copper has opened the week in bright form amid the risk-on session. Prices are benefiting from the easing of lockdowns from India to Indiana, falling stockpiles, and China’s pledge of “more powerful” policies to counter the hit to growth. In the quarterly monetary policy report, China’s central bank didn’t repeat an earlier vow to “avoid excess liquidity flooding the economy”, but pledged “more powerful” policies to counter the economic hit, which boosted investors’ confidence in the economy and the red commodity itself.

During the start of the Asian trading session this week, oil prices opened lower despite a late Friday report by the CFTC that showed hedge funds boosting their bullish bets on oil. This was probably due to investors taking into account, a less than satisfactory signs of recovery in oil demand amidst a huge oil glut. Further a risk of resurgence in the virus cases over in the US and Korea dampened any positive sentiment that was building over the weekend. The CAD however failed to show a similar fall in price given that much better than expected economic data was released last Friday. For now, the CAD looks halted as it holds above a key support level. A break of this support will show the CAD strengthen further against the USD.

Technical & Trade views

USDCAD (Intraday bias: bullish above 1.39094)

Price opened lower at the start of the Asian trading session. With price right now on key support at 1.39094, a short term bounce reaction towards 1st resistance at 1.40081 is expected. Stochastics coming close to support where price bounced in the past. Further, bullish divergence is seen forming.

UKOIL (Intraday bias: Bearish below 31.12)

Price came close to testing short term descending trendline resistance. A short term drop below 1st resistance at 31.12 towards 1st support at 28.66 is expected. 1st support finds confluence with multiple Fibonacci ratio levels as well. Stochastics is also reacting below resistance where price pulled back in the past

XAUUSD ( Intraday bias: bullish above 1703.89) 

We turned bullish as price is approaching 1st support at 1703.89  where the horizontal pullback support and the trendline are. Price is likely to pull back to the trendline and bounce off it towards 1st resistance at 1735.87  where the 78.6% fibonacci extension and horizontal swing high resistance are. Ichimoku cloud is also showing bullish sentiment. 

XCUUSD ( Intraday bias: bearish below 2.4258)

We turned bearish as price is approaching 1st resistance at 2.4258 where the 78.6% fibonacci retracement and 61.8% fibonacci extension are. Price is likely to drop towards 1st support at 2.2852  where the 50% fibonacci retracement and horizontal overlap support are.

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