Tiomarkets Daily Commentary 26th June 2020
Global markets attention has turned rapidly to the disturbing increases in Covid 19 cases among certain US states. Wednesday’s pullback in stocks was rather surprisingly reversed on Thursday. Would Friday see more of the same, would some semblance of sanity and realism return? After all, thoughts of healthcare systems being over-run in Florida and Texas can not be good right? The US has really turned a global pandemic into a political battlefield with conspiracy theories galore. A battle of wills to re-open the economy versus the science of protecting lives. It’s not a good trade off and the markets are finally recognizing it.
Friday started out calmly enough with the USD generally firmer, most notably against GBP as Brexit negotiations begin to heat up. Remember Brexit? After a pandemic you could easily be forgiven for forgetting, but the next few months are critical for the UK. Anyway, I digress. The prospect of certain states pausing their re-opening plans has traders nervous. US equity markets would open lower and quickly add to their losses with the DJ down 500 points in short order. The surprising move came form XAU. With the sell-off in stocks you might have expected the ‘safe-haven’ metal to have rallied but instead sold off sharply from 1765 down to 1747.50. However as the equity market sell-off continued, XAU buyers would emerge eventually pushing the yellow metal to a high just shy of 1772. For FX, the weaker stock market saw the USD continue to appreciate. EURUSD would be the one exception with support again being found sub-1.1200 to close at 1.1220. GBP would drop from 1.2436 to 1.2317. USDJPY would rally from 106.80 to 107.35 and USDCAD 1.3628 to 1.3715. I'm still not convinced by the USD rally when stocks get sold off but for now that’s how the market wants to play it. I think of most significance was the snap back in XAU. Keep an eye on that one this week. As for equities the close would see only a minor rally off the lows with the DJ closing lower by over 730 points or 2.84%. The new week sees US NFP data for June released on Friday. That should keep traders on their toes for the week.
As mentioned, XAU has been showing signs of further strength and performed well on Friday as stocks headed lower. As you can see from the attached chart, we have decent short term support at the 1745 level with resistance coming in at 1780. A break above there could well see a test of 1800 and beyond but will likely be a reaction to developments in the equity markets.