Asian stocks were mixed on Wednesday after U.S. stock surged to a one-month high. Treasury yields and the USD were little changed. On Tuesday, Johnson& Johnson, JPMorgan Chase and Wells Fargo reported their latest earnings and showed a mixed picture. Johnson & Johnson was forced to cut its full-year guidance due to the pandemic, but the company beat expectations for the first quarter and raised its dividend. Meanwhile, JPMorgan Chase missed analyst estimates badly as credit loss reserves were built up ahead of what will be a rough period for many banks. After both JPMorgan and Wells Fargo posted their highest loan-loss provision in a decade, bank stocks are in a reality check now. Citigroup, Bank of America and Goldman Sachs will report results tonight and are likely to fall short of expectations. But overall, the broader market jumped, indicating that most investors regain confidence when Covic-19 infections are slowing.
Oil had its bad day on Tuesday tumbling 10% on Tuesday, as investors came back to check the imbalance between the supply and demand reality. Although the OPEC+ has agreed to reduce output by 9.7 million barrels per day in May and June, OPEC has expected the global oil demand to plunge 20 million barrels a day, almost double the 9.7 million barrels a day production cut that was agreed upon. Saudi Arabia has been flooding the market before the production deal starts in May. Oil pared some losses on Wednesday morning, but the worries of demand destruction are likely to last for a while.
The dollar is still on a bearish trend given that the USD liquidity crunch has eased and the stock market is back on an upward trend. Nevertheless, the focus of today will be on the Bank of Canada’s rate meeting. Since BoC has already cut its interest rate from1.75% to a record low of 0.25%, it is unlikely that this cut could continue. Although it is expected that BoC is likely to hold interest rates unchanged, the key will be on their rhetoric - how they address the issue of zero interest or even negative rate. If they keep this idea open, CAD could weaken further.
Gold notched its new eight-year high at $1748 on Tuesday. Gold could be a good asset when investors are expecting central banks to inflate their balance sheets further in the coming months. The investment demand for gold could continue given the real interest rates are likely to remain negative in the long-term economic recovery phase.
Copper is stabilizing waiting for more progress from the pick up of manufacturing activities in China. According to Reuters, new bank lending in China rose sharply to 2.85 trillion yuan ($405 billion) in March, with total social financing hitting a record, as the central bank pumped in more liquidity to support the coronavirus-ravaged economy. This is good news for risk-on metal copper, which could increase the demand for copper while the market is also worrying about the disruption in supply caused by the virus.
Technical & Trade views
USDCAD (Intraday bias: Bearish below 1.3941)
We remain bearish as price breached our downside confirmation. Once price broke below the downside confirmation, it opens up a larger drop from here towards 1st support. The downside confirmation is a confluence level of horizontal swing low. 1st support which happens to be where the 100% fibonacci extension and horizontal swing low line up well.
UKOIL (Intraday bias: bearish below 30.65)
We turn bearish as the price broke below our previous support level. We are seeing the price dropping from 1st resistance at 30.65 towards 1st support at 27.65. 1st resistance happens to be where the 23.6% Fibonacci retracement and horizontal overlap resistance line up well.1st support is where the 100% Fibonacci extension and graphical pullback support are. Currently the Ichimoku cloud is also showing more bearishness is possible.
XAUUSD ( Intraday bias: bullish above 1701.52)
We remain bullish technically as the price is bouncing off 1st support at 1701.52 towards 1st resistance is where the 100% fibonacci extension is. Ichimoku cloud is showing a further push up towards 1st resistance is possible. The 1st support happens to be where horizontal swing high isl and could serve as a key support level.
XCUUSD ( Intraday bias: Bullish above 2.3375 neutral below)
Our call is still valid. We remain bullish if price supasses upside confirmation at 2.3375. Now price is approaching our new upside confirmation at 2.3375 where the important horizontal overlap resistance is. If price breaks above the upside confirmation, it will open up a bigger bounce. Our previous upside confirmation is now our 1st support, where the 50% fibonacci retracement and horizontal overlap support happen to line up 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.