• 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.

  • USD/JPY is consolidating gains near the 109.00 figure. 
  • The level to beat for bulls is the 110.00 resistance.
 

USD/JPY daily chart

 
USD/JPY is trading above the 100/200 SMAs as the spot is trying to stabilize above the 107.00 handle amid slightly better market mood. 
 

USD/JPY four-hour chart

 
USD/JPY is holding above the 108.70 level and the main SMAs on the four-hour chart as buyers are looking for an extension up en route to the 110.00, 111.00 and 111.70 resistance levels on the way up while support should emerge near the 108.70, 108.00 and 107.00 levels. 
 

Additional key levels

 

  • USD/JPY is consolidating gains near the 109.00 figure. 
  • The level to beat for bulls is the 110.00 resistance.
 

USD/JPY daily chart

 
USD/JPY is trading above the 100/200 SMAs as the spot is trying to stabilize above the 107.00 handle amid slightly better market mood. 
 

USD/JPY four-hour chart

 
USD/JPY is holding above the 108.70 level and the main SMAs on the four-hour chart as buyers are looking for an extension up en route to the 110.00, 111.00 and 111.70 resistance levels on the way up while support should emerge near the 108.70, 108.00 and 107.00 levels. 
 

Additional key levels

 

  • RBA’s upbeat tone helps AUD gather strength on Tuesday.
  • Wall Street’s main indexes extend rally, post strong gains.
  • US Dollar Index slumps to fresh five-day lows below 100.

After climbing above the 0.6200 handle during the European trading hours, the AUD/USD staged a technical correction and dropped to 0.6166 before regaining its traction. As of writing, the pair was up 1.9% on a daily basis at 0.6202.

The Reserve Bank of Australia’s relatively optimistic tone in its policy statement provided a boost to the AUD on Tuesday. After announcing that it kept its policy rate unchanged at 0.25% as expected, the RBA noted that a recovery in the global economy was expected once the coronavirus is contained. “If conditions continue to improve, it is likely that smaller and less frequent bond purchases will be required,” the RBA added.

USD selloff intensifies on Tuesday

On the other hand, the greenback struggles to find demand as risk-on flows continue to dominate financial markets for the second straight day on Tuesday. The US Dollar Index, which advanced to 100.93 on Monday, broke below the 100 mark during the American session to help the pair push higher.

Reflecting the upbeat market sentiment, Wall Street’s three main indexes are up between 1.7% and 2.7% while the 10-year US Treasury bond yield is adding 14%.

On Wednesday, Home Loans and Investment Lending for Homes data from Australia will be looked upon for fresh impetus. Later in the day, the FOMC will publish its monetary policy meeting minutes.

Technical levels to watch for

 

  • RBA’s upbeat tone helps AUD gather strength on Tuesday.
  • Wall Street’s main indexes extend rally, post strong gains.
  • US Dollar Index slumps to fresh five-day lows below 100.

After climbing above the 0.6200 handle during the European trading hours, the AUD/USD staged a technical correction and dropped to 0.6166 before regaining its traction. As of writing, the pair was up 1.9% on a daily basis at 0.6202.

The Reserve Bank of Australia’s relatively optimistic tone in its policy statement provided a boost to the AUD on Tuesday. After announcing that it kept its policy rate unchanged at 0.25% as expected, the RBA noted that a recovery in the global economy was expected once the coronavirus is contained. “If conditions continue to improve, it is likely that smaller and less frequent bond purchases will be required,” the RBA added.

USD selloff intensifies on Tuesday

On the other hand, the greenback struggles to find demand as risk-on flows continue to dominate financial markets for the second straight day on Tuesday. The US Dollar Index, which advanced to 100.93 on Monday, broke below the 100 mark during the American session to help the pair push higher.

Reflecting the upbeat market sentiment, Wall Street’s three main indexes are up between 1.7% and 2.7% while the 10-year US Treasury bond yield is adding 14%.

On Wednesday, Home Loans and Investment Lending for Homes data from Australia will be looked upon for fresh impetus. Later in the day, the FOMC will publish its monetary policy meeting minutes.

Technical levels to watch for

 

Oil producers in the US are expected to cut the oil output by about 2 million barrels per day, Reuters reported on Tuesday, citing a report published by the US Energy Department.

Meanwhile, US Energy Secretary Dan Brouillette confirmed that he will be participating in the virtual G20 meeting on Friday to talk about stabilizing global oil markets.

Market reaction

The barrel of West Texas Intermediate (WTI) continued to push lower on these headlines and was last seen trading near $26, erasing around 1% on a daily basis.