Coronavirus, Reopening Plans & Gold
The DXY continued to remain subdued beneath 97.80 last week as risk appetite improved somewhat across markets. NZD gained close to 2% against the greenback as markets continued to grapple with surging Covid-19 cases amidst the easing and reopening plans worldwide. Cases in Florida continued to rise with daily cases making new record highs as the week progressed. NIH’s Fauci warned the nation that a mutation will allow the virus to replicate and spread more easily whilst also citing that vaccines are entering Phase 3 trials. Gold also rallied and broke above key levels to move to highs last seen 8 years ago as the Dollar remained supressed.
Tensions between the US and China continued last week after the nation passed a bill to sanction China over human right abuses and the national security law imposed on Hong Kong. This comes as other nations such as the UK and Canada announced that they will be looking to intervene and take additional measures in regard to immigration. China will be set to retaliate in some capacity and reports suggest they will be looking to impose increased tariffs on both the UK and Australia, this comes as the UK is set to also end the use of Huawei technology in its 5G networks due to security issues.
Trade negotiations between the EU and the UK wrapped up a day early last week though top negotiator Michel Barnier outlined that ‘serious divergences still remain’. Trade talks are likely to continue this week and the possibility of a no deal Brexit continues to grow and leave investors, financiers and businesses uncertain about their future. PM Johnson is likely to outline a timetable in the upcoming days covering the reopening plans as he hopes to forge a path ahead for the UK recovery, though Johnson has made it clear that he will not hesitate to reimpose the restrictions should the virus spiral out of control once more. Chancellor Sunak is preparing to provide further support for businesses after reports were made that a voucher worth up to GBP 500 would be provided to adults to spend on companies that have been affected by the pandemic. BoE Gov Bailey once again reiterated that negative rates is a measure undergoing review should further stimulus be required though he has also warned banks of the issues and challenges related to its possible deployment.
WTI Crude Oil
WTI Crude Oil’s bull run continued last week as the commodity rallied to test $40.50/bbl. before retreating. Price is currently benefiting from the improved risk appetite though mildly came under pressure as reports arose highlighting that China may struggle to fulfil its agreement of purchases for US energy products.
In the cryptocurrency space, BTCUSD has been range bound and found support around $8,900 and Ethereum continues to hold above the 50EMA which is acting as dynamic support on the daily timeframe, resistance for this asset still remains at $250. XAUUSD broke higher last week as USD continued to weaken and now trades above $1,770/troy ounce. The next key level for this asset is at $1800 which doubles as psychological number and weekly level of resistance with the level last being breached in 2011.
Here is a breakdown of the high impact data releases this week.
15:00 ISM Non-Manufacturing PMI. Markets to watch: USD Crosses
05:30 Cash Rate & RBA Rate Statement. Markets to watch: AUD Crosses
13:30 Employment Change & Unemployment Rate. Markets to watch: CAD Crosses