SPX500 Hits All-Time Highs
US equities surged higher on Monday with the S&P500 hitting new all-time highs intraday before pulling back towards the close. The G20 theme remains dominant with Washington and Beijing calling for a temporary truce to the trade wars.
On the economic front, US data was somewhat better than expected. ISM manufacturing PMI came out at 51.7, beating estimates of a decline to 51.3. However, construction spending fell 0.8% on the month.
US Threatens EU with Tariffs
The euro extended the declines on Monday, losing 0.62% on the day. The declines in the common currency came as the US dollar bounced back. Washington turned focus to the EU. President Trump threatened the EU with $4 billion in tariffs in retaliation to the EU subsidies on Airbus, a competitor to the US-based Boeing company. The US Trade Representative’s office published a list of 89 categories that could be hit by higher tariffs.
EURUSD to Extend Declines
The currency pair could maintain the downside momentum. Any near-term bounce could see new selling pressure building up. The recently breached support level at 1.1339 could be tested for resistance. To the downside, the lower support at 1.1250 will be the likely target. However, we do not expect the EURUSD to extend below this support level in the near term.
Crude oil Muted to OPEC Decision
The OPEC meeting is due to end today. However, Russia and Saudi Arabia, two of the leading oil producers declared on Monday that they will extend the current oil production cuts. OPEC is expected to maintain production at the current levels for up to nine months. The decision led to a muted response in the oil markets. WTI crude oil was down 0.61% on the day.
Is There Scope for Oil Prices to Rise?
WTI Crude oil is seen currently trading within the range of 60 and 57.50. The recent reversal that came close to the $60.00 handle has led to oil prices slipping lower. However, the support level at 57.50 is yet to be tested. We expect to see oil establishing support near the 57.50 handle more firmly. This will keep the upside bias intact. However, in the short term, we expect oil to remain trading flat.
Gold Slips as Market Sentiment Eases
Gold prices opened the week, gapping lower following the developments from G20 meeting over the weekend. The precious metal was down 0.96% lower on the day as a result. It reflected the easing market sentiment following the US and China making temporary truce on the trade wars. Somewhat better than expected economic data out of the US also helped to keep gold prices in check.
Will XAUUSD Continue to Fall Further?
The breakdown below the initial support level at 1404 has opened the downside in gold. We expect that the declines will keep the bearish momentum going. The lower support is at 1354. Establishing support at this level will be key to prevent further declines. We expect XAUUSD to maintain a sideways range within 1404 and 1354 in the near term.