The equity markets were on a volatile ride on Thursday. A day after equities fell following the Fed rate cut, the markets recovered mid-day. This came following a weak patch of economic reports from the US. Markets rallied on hopes that the Fed will reassess the economic conditions and follow through with another rate cut. However, President Trump announced fresh 10% tariffs on China. This came in the midst of US and China trade talks. The announcement pushed equity markets lower while safe haven assets gained.
EURUSD Recovers off a Two-Year Low
The common currency initially fell to a fresh two-year low on the Fed announcement. But the currency pair managed to recover, posting some modest gains on the day. The rebound was helped by the US ISM manufacturing PMI which fell to 51.2, while construction spending was down 1.3% on the month.
Can the EURUSD Maintain the Upside?
The EURUSD currency pair’s rebound saw prices retesting the trend line from below. This potentially indicates a dynamic resistance area. If the currency pair fails to break out above this level, we anticipate price to retreat. For the moment, EURUSD is likely to remain within Wednesday’s lows.
WTI Crude Oil Drops Sharply
Crude oil prices fell over 5.50% on Thursday. The declines came late in the evening amid a mix of various factors. Earlier in the week, the EIA reported a drawdown in the stockpiles. This was further to the OPEC report about oil production slowing. However, oil prices ignored the fundamentals. The USD strength, along with the trade wars weighed on the commodity.
Crude Oil is Testing the Support
The decline in crude oil prices has sent the commodity down to the initial support level of 54.42. This marks the retest of the lower support. Currently, oil prices are attempting to post a rebound. But we expect price to settle back into the range between 57.50 and 54.40 region in the short term. A break down below 54.40 will trigger sharper declines to 50.00.
Gold Rebounds as Uncertainty Rises
The precious metal managed to post strong gains on Thursday. The gains came following the announcement of the new tariffs from the Washington administration. China could possibly retaliate once again with its own tariffs on US goods. Gold rallied to highs of 1449 before reversing the gains promptly.
XAUUSD Likely to Consolidate Again
The rebound in gold prices sent the precious metal to test previous highs from mid-June. However, the reversal off the highs has pushed gold back to the support area of 1431–1428 levels. We could expect to see prices holding on to this support in the near term. But a break down below the support will accelerate the declines. The previous support of 1404 remains the key target to the downside.