Daily Insights – Gold rises above $1950 as Brexit talks fray
Fundamental Factors:
Japan’s Chief Cabinet Secretary Yoshihide Suga was elected Monday by ruling Liberal Democratic Party lawmakers and representatives as the party’s 26th president, setting him on course as Japan’s next prime minister. The ruling and opposition parties will convene the interim parliament on September 16 to elect Suga as the new prime minister, succeeding Shinzo Abe as the country’s leader.
Meanwhile, world oil demand in 2020 is expected to fall by 9.46 million barrels per day (bpd), the Organization of the Petroleum Exporting Countries (OPEC) said in its monthly report. In the previous forecast, the decline was expected at 9.06 million bpd. Forecast for global demand for its crude is also lowered by 700,000 bpd in 2020 and by 1.1 million bpd in 2021, due to higher non-OPEC supply view and lower global demand.
U.S. stock were higher on Monday, of which S&P 500 up by 1.27% while Nasdaq and Dow Jones were up by 1.86% and 1.18%, respectively. Chinese stocks, on the other hand, was mixed in early Asian trade. The Growth Enterprise Index inched up by 0.24% while the SSE Composite Index and Hang Seng Index was down by 0.05% and 0.08%, respectively.
Technical Analysis:
Dow Jones: The two-day U.S. Federal Reserve monetary policy meeting will end on September 16 (U.S. local time). Market participants expect the Fed to continue to suppress interest rates over the long term in order to drive economic growth. However, it is believed that there would not be any substantial positive news coming from the meeting and thus, the U.S. stocks may continue to fluctuate. Dow Jones is currently in the correction territory after reaching the target level of 27500. Keep an eye out on the range bound level of between 28200 and 27500.
Gold: Gold rebounded above $1950 per ounce as U.S. dollar weakens. The gold market is awaiting the Fed’s rate decision. With interest rates remain low, market participants are expecting a stronger inflation. Higher inflation will bring the real interest rates lower, which bode well for gold. Looking at the technicals, gold is expected to go up amidst volatility in the short-term. Keep an eye on the long positions of gold.
Crude oil: In its latest monthly report, OPEC said the outlook for oil prices would weaken as a result of weak demand and a recovery in shale oil production. It has forecasted a 9.46 million bpd decline in global demand for crude oil in 2020. In addition, Libya has pledged to end a months-long blockade of oil facilities, a move that will push up the supply of crude oil. Oil prices were slightly volatile on Tuesday and closed below $40 for the second day in a row as it suffers from a gloomy outlook for global demand. Crude oil is still heading downwards after the recent sharp drop while resistance levels continue to go down. Keep an eye on the target price of $34.
EUR/USD: The dollar index fell below the 93 level at one point. The euro rose for the fourth straight time against the dollar as markets continued to push the common currency higher amidst a weaker dollar. EUR/USD is in the correction territory and range bounding between 1.175 and 1.2. Pay attention to the lower support, which would drag the currency pair lower if breaks.
GBP/USD: The Brexit talks continues to fray, with the pound rising against the dollar and falling after hitting 1.2919. The UK continues to push for an internal market bill. The EU is prepared to delay a decision on market access for UK euro clearing services for EU clients because the bill violates the Brexit deal. The UK-EU talks have deteriorated further and the pound has struggled to strengthen against the dollar. At present, the long cautious, short strong open the space below, reached the first target position 1.28 near, the late high probability shock correction, continue to pay attention to the short continuation after the callback.
The information and analysis included in this report only represents the research analyst’s views. Forex trading involves risk and you are advised to exercise caution in relation to the report. If you are in any doubt about any of the contents, you should obtain independent professional advice.
