Gold markets
If there was a valuable lesson for Gold investor to take from this week, it’s that strategic buying is likely to emerge on corrections down towards significant resistance.
The latest surge even suggests Gold strength could remain impervious to bouts of dollar strength.
I’m not going to rehash the list of bullish narratives, but a diversification strategy into Gold will continue to gain broader appeal against the dovish central bank's policy backdrop while seasonal physical demand factors will continue to support. Such as India where gold imports rose 13% y/y in June to US$2.69bn despite a 6-year high in the gold price.
But Friday payroll holds a lot of weight on the FOMC dove-O- meter, so I would expect traders would skew to better sellers as liquidity thins into the July 4 US festivities.
Oil Markets
Price action speaks louder than words and the fact that oil prices haven’t exactly pulled off the mat after a very bullish inventory report doesn’t bode well in the least.
I’ve been throwing a lot of numbers into the machine today, but the PMI’s are such a massively weighted and accurate medium-term industrial barometer that they entirely blot out the benefits of the API survey, which suggest we could move lower. And for good measure, Swedens PMI just moved into contraction territory. This is a major global concern.
But with the July 4 holiday not to mention payrolls on Friday, so unless we take out the overnight lows, I will suspect traders would be less inclined to chase this move given the expected holiday liquidity drain later in the London session.
Asia Equities
While nursing and extended post-G-20 hangover Asian indices generally traded lower with Japanese chipmakers leading declines amid concerns Japan/Korea trade spat could take a nasty turn for the worse.
But the reality is setting in, especially in the broader trade war scheme of things; little has changed which is the sobering reality.
Currency Markets
G-10
G10 FX vols have been a bit firmer today as the market veered into the risk-off territory at Asia open led by the ramp in gold. And as one would expect the haven demand picked up but have settled significantly.
One take away is clear; the market is getting high risk fidgety again.
USD/CNH
USD/CNH continued to trade higher but fell short of the next major test of 6.90 SHCOMP is down 0.7% this morning which weighed on sentiment, but traders would be more inclined to use the move higher to lighten up on long USD risk ahead of Friday payroll as liquidity could be sparse in the overnight session.