• US dollar index (DXY) is easing down just below the 100.00 mark. 
  • Support can emerge near the 99.50 and 99.00 levels. 
 

DXY daily chart

 
DXY is trading in an uptrend above the main daily SMAs as the greenback is trading in two-day’s lows below the 100.00 psychological mark.
  

DXY four-hour chart

 
DXY is trading above its 50/200 SMAs on the four-hour chart suggesting a bullish bias in the medium term, however, bulls need to regain the 101.00 figure in order to resume the uptrend towards the 101.50 level. On the flip side, the market could find support near the 99.50 and 99.00 price levels on the way down. 
 
   

Additional key levels

 

US President Donald Trump says “we’re in talks to supplement money available for loans to businesses.” President Donald Trump plans to meet virtually with executives of US banking giants to discuss boosting relief for small business at 1900 GMT.

According to AFP, “Trump will be meeting with Goldman Sachs Chief Executive David Solomon, Citigroup Chief Executive Michael Corbat, Bank of America Chief Executive Brian Moynihan and Gordon Smith, Chief Operating Officer of JPMorgan Chase.

the Paycheck Protection Program launched Friday offers $350 billion in government-guaranteed financing through private lenders, which will be forgiven if businesses ranging from shops to restaurants use the funds largely to pay their workers.”

Trump has also been vocal about the US dollar. He made a comment saying that the US dollar has remained very strong. Usually, we would see a market reaction to that but the playing field has to be right. We are not on usual grounds and hence the comment has been ignored. 

 

  • US producers are expected to cut output by 2 million bpd.
  • Iranian oil minister says US and Canada need to play a role in production cuts.
  • API will release its Weekly Crude Oil Stock report at 20:30 GMT.

The selling pressure surrounding crude oil intensified during the American trading hours on Tuesday and the barrel of West Texas Intermediate (WTI) plummeted to a daily low of $23.61. As of writing, the WTI was trading at $23.75, erasing more than 9% on a daily basis.

OPEC+ output cut depends on involvement of other producers

This recent price action suggests that markets seem to be having second thoughts about OPEC and non-OPEC producers’ ability to reach an agreement on oil output cuts when they meet on Thursday.

Earlier in the day, Reuters reported that output cuts would be conditional on how much of a production reduction other producers such as the US, Canada, Brazil and others will propose.

Additionally, Iranian Oil Minister Zangeneh said the US and Canada need to play a role when deciding on output cuts. “There needs to be an agreement on production numbers before any future meeting between OPEC and non-OPEC producers,” Zanganeh added.

Meanwhile, the monthly report published by the US Department of Energy revealed that oil producers in the US were expected to lower their output by about 2 million barrels per day even without the government’s involvement.

Investors will be keeping a close eye on the American Petroleum Institue’s Weekly Crude Oil Stock report that will be released at 20:30 GMT. 

Technical levels to watch for

 

  • Precious metals topping and silver prices slump.
  • COVID-19 mixed headlines and uncertainty should keep safe havens underpinned.

XAG/USD has lost its grip of the 15 handle and has fallen to a low of $14.90 from a high of $15.42, although remains up 0.21% on the day so far. Precious metals had seen a significant uptick in sentiment this week despite a de-escalation of COVID-19 new cases. In fact, the inverse relationship continues on Tuesday between the COVID-19 contagion and price action in precious metals, as both silver and gold are falling with a rise in the Spanish death toll and New York cities cases which are dominating the headlines. 

COVID-19 dominates market sentiment

Spain saw a surge of 734 more COVID-19 deaths, with the total death toll reaching 13,798, according to Health Ministry data released Tuesday with over 5,500 new cases were confirmed, bringing the total of official cases to 140,510. Over 43,200 of those patients have recovered – an increase of nearly 3,000 since Monday. Only Italy has reported more COVID-19 deaths than Spain, but with Spain’s lower population, it has surpassed Italy in terms of per capita fatalities.

Meanwhile, in New York, the U.S. COVID-19 epicentre, Governor Andrew M. Cuomo said earlier today that 731 people had died of the virus since Monday, the highest one-day total yet. NY’s death toll now stands at 5,489, enough people to fill a small town. “Behind every one of those numbers is an individual, is a family, is a mother, is a father, is a sister, is a brother,” Cuomo said. “So a lot of pain again today for many New Yorkers.” The governor noted and emphasized, however, that death was a lagging indicator in the fight against the virus: People are often ill with it for a long time before they die. Governor Cuomo said that the state still saw evidence that the virus was nearing a plateau.

However, US stock markets from a wider viewpoint, and are fixated on general signs that the spread of COVID-19 is in fact slowing and bulls will prey on the positive headlines (weighing on precious metals). On Tuesday, Wall Street has been ticking higher with the S&P 500 up 1.97%, the Dow up more than 2% and the Nasdaq up around 2% as well at the time of writing. US benchmarks are in the green for the second day in a row and hit their highest level since 11 March at the start of trading.

Uncertainty prevails

Also, this week’s reports say the US Treasury market and short-term securities market are operating more smoothly than a couple of weeks ago, following the Federal Reserve’s massive injection of liquidity into those markets, volatility has declined, (VIX is at 44, way down from the mid-March peak of 85). However, the coming week is going to be “our Pearl Harbor moment, our 9/11 moment,” said U.S. Surgeon General Jerome Adams, regarding an expected wave of coronavirus deaths across the U.S. New York New Orleans and Detroit face especially tough days ahead. Either way, uncertainty will prevail which is supportive of precious metals. 

“Looking forward, we continue to see a set-up for a multi-year bull market being cemented, as the market is flooded with monetary and fiscal stimulus, while Fed rates are at the zero bound, which suggests investors will continue to seek gold’s warm embrace as real global rates become entrenched in negative territory,” 

analysts a TD Securities argued. 

Silver levels

 

 

US Treasury Secretary Mnuchin announced on Tuesday that they will be seeking an additional $250 billion for the small business loan program, as reported by Reuters.

Earlier in the day, “the next economic relief bill should have more funding for people’s immediate needs, election resources,” US House Speaker Nancy Pelosi told CNN.

Market reaction

Wall Street’s main indexes edged slightly lower in the last minutes but remain on track to post decisive daily gains. As of writing, the Dow Jones Industrial Average and the S&P 500 were both up around 2% while the Nasdaq Composite was adding 1.3%.

The coronavirus crisis requires unprecedented forceful, co-ordinated and ambitious action by all governments in the EU, Central Bank of Ireland Governor and European Central Bank (ECB) policymaker, Gabriel Makhlouf, said on Tuesday.

“Whether this action is through a coronabond, ESM or something else, I’m agnostic,” Makhlouf added. “Targeted measures to support households and firms are needed, I do not think helicopter money is a tool fit for this particular crisis.”

Market reaction

The EUR/USD pair largely ignored these comments and was last seen trading near 1.0900, adding 1% on a daily basis.

The coronavirus crisis requires unprecedented forceful, co-ordinated and ambitious action by all governments in the EU, Central Bank of Ireland Governor and European Central Bank (ECB) policymaker, Gabriel Makhlouf, said on Tuesday.

“Whether this action is through a coronabond, ESM or something else, I’m agnostic,” Makhlouf added. “Targeted measures to support households and firms are needed, I do not think helicopter money is a tool fit for this particular crisis.”

Market reaction

The EUR/USD pair largely ignored these comments and was last seen trading near 1.0900, adding 1% on a daily basis.