Stocks dropped Friday, led by Chinese technology firms, after a U.S. move to prohibit transactions related to WeChat stoked tensions. Treasuries and the dollar rose. China and Hong Kong shares saw the bulk of losses, with WeChat operator Tencent Holdings Ltd. slumping more than 7%. The offshore yuan also retreated along with S&P 500 futures.
USD is back on the surge backed by escalation of geopolitical risks. President Donald Trump signed executive orders prohibiting U.S. residents from doing any business with WeChat, TikTok or the apps’ Chinese owners beginning 45 days from now, citing national security risks. These short-term geopolitical risks could provide some support for USD amid the sluggish U.S. data.
Copper prices edged lower on Friday as rising Sino-U.S. tensions and increasing production output, with miner Codelco indicating that it would resume operations stalled by the pandemic, even as top consumer China's July imports hit a record high. Copper prices came under pressure as the market risk sentiment dampened after President Donald Trump unveiled sweeping bans on U.S. transactions with China's ByteDance and Tencent, operator of the messenger app WeChat. Looking ahead, rising geopolitical tension and increasing number of Covid-19 cases could put prices under further pressure.
Gold retreated from its new all-time high on Friday and was set for its ninth straight weekly gain, with a softer dollar boosting demand for the safe haven metal, coupled with falling U.S. Treasury yields and increasing concerns over the global economic fallout from rising COVID-19 cases. Looking ahead, prices remain on track to continue its uptrend, buoyed by a weaker dollar as it is often seen as a hedge against currency debasement and inflation.
Oil gradually drifted lower over the course of this week as investors faced more OPEC+ supply whilst still contending with virus-driven demand weakness. The drop in oil prices was stalled by the fact that US crude inventories posted their biggest back to back weekly decline for this year. Whilst the pandemic is not getting better, it most definitely hasn’t been getting worse as well. This sort of mixed sentiment in the market is expected to persist for the time being. In line with oil prices drifting lower, the CAD underperformed against the USD, causing the USDCAD to rise sharply overnight.
Technical & Trade views
USDCAD (Intraday bias: bullish below 1.3361)
Price is facing bullish pressure from our upside confirmation, in line with our horizontal overlap support, where we could see a further bounce towards 1st resistance if price breaks above the upside confirmation.
UKOIL (Intraday bias: Bullish above 44.76)
Price drifted sideways, however still holding above long term moving average. With price close to 50% Fibonacci, a short term bounce above 1st support at 44.76 towards 1st resistance at 45.59 can be expected.
XAUUSD (Intraday bias: Bullish above 2050.08)
Price is facing bullish pressure from our ascending trend line and first support, in line with our 38.2% fibonacci retracement and horizontal overlap 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 2.91307)
Price is facing bearish pressure from our first resistance in line with our 88.0% fibonacci extension, horizontal swing high resistance and 78.6% 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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Desmond Leong runs an award-winning research firm (The Technical Analyst finalists 2018/19/20 for Best FX and Equity Research) advising banks, brokers and hedge funds. Backed by a team of CFA, CMT, CFTe accredited traders, he takes on the market daily using a combination of technical and fundamental analysis.