Essential Insights

  • Markets await FOMC minutes later today
  • Gold fails to uphold $2,000 and is down almost 2% on the day
  • The Dollar Index (DXY) stages a rebound, rising sharply

Dollar Index and Gold 
Gold has slipped to session lows, slipping from $1995 to  $1960 quickly, meanwhile the dollar index rose from a low of around 92.25 to 92.60. This comes as market participants await key FOMC minutes this evening, where we will know how the FED intends to support the economy over the summer, will they increase quantitative easing measures? take measures to combat inflation? .. or simply do nothing at all.

Though Gold has taken a slight battering today, softer US yields and a generally weak dollar combined with inflationary fears and low-interest rates still remain supportive of stronger gold demand, thus prices are likely to mute this dip eventually and likely rise above $2,000 an ounce.

”Investors aren’t sure whether the historically high prices are a good entry point for hedging their risk positions, price retreats, however, should attract dip buyers,” said Ipek Ozkardeskaya, market strategist at Swissquote Bank SAIt’s also worth noting that the majority of intra-day gold dips do tend to be reversed and faded, supporting the comments made by Ipek.

NZD, CAD, AUD
NZD/USD rose after testing and rejecting from a 0.6600 support eventually meeting 0.6650, lead by dollar weakness earlier this morning. However, since the dollar spike this US trading session, the pair is approaching the o.6600 support once again. Similarly, AUD/USD rose initially and then fell on dollar strength, with USD/CAD rebounding slightly higher and is approaching a key 20-day moving average that prices have tested and rejected from three times in the past few trading days. A break above this could see a move towards 1.33, elevating weeks of selling pressure.

US VS CHINA
The US and China are said to be conducting a video conference over the next few days, discussing progress over ‘Phase One’ of the US and China trade deal. The recent actions taken by the U.S on Chinese technology companies will also be discussed. China has not committed to the phase one agreement thus far in terms of commuting to the rate of purchases agreed upon, despite agreeing to ramp up spending in the US agricultural sector ( a key sector for the US), China is still significantly behind purchases.

With respect to ongoing issued between the US and China, the latest issues have revolved around the activity of Chinese companies and accusations that all Chinese tech companies have been sending the Chinese government confidential information and in cases, conducting illegal surveillance on US companies to gain a competitive advantage. Trump has imposed special ‘regulations’ on the treatment towards all Chinese tech firms operating in the US.

This seems to be a very tit for tat scenario, where Trump will undoubtedly continue to scrutinise Chinese tech companies unless China fulfils its Phase One agreement.

Equities
Equity bourses have not made any noticeable movements, as markets await tonights FOMC statement and assess rising tensions between the US and China.  Something to note, however, is that both Spain and Italy have recorded very sharp increases in COVID-19 cases today, this may affect European bourses coming into tomorrows session.