Risk sentiment improved during the Asian session on Tuesday, with Asian stocks gaining across the board, while the dollar was little changed and silver’s retreat from its peak dragged gold lower.
At the close of trading, Australia’s ASX200 index closed up 1.49%; The Nikkei 225 closed up 0.96 per cent; South Korea’s Kospi index closed up 1.32 percent. A shares rebounded across the board.
The retail trading frenzy has started to calm down, and while there will still be plenty of interest and attention for companies such as GME and AMC, the market as a whole is adjusting to the surge in volatility, at least for now.
This undoubtedly helps overall market sentiment, sub-market intraday risk bias intensifies. Asian stocks were trading higher, with S&P 500 futures up 0.6% and Nasdaq futures up 0.7%.
In any case, in the broader market context, short interest is at an all-time low, suggesting that this latest episode will pass sooner or later.
On the news side, the market is focused on the U.S. stimulus plan. Markets were strong ahead of Tuesday’s talks between U.S. President Joe Biden and Republican senators on a new outbreak relief bill.
White House press secretary Jen Psaki said Mr. Biden was looking forward to meeting with Republican lawmakers to ‘engage in a solid, comprehensive conversation and seek cooperation,’ but remained unchanged in his view that the new package should not be too small.
Senate Republicans have proposed a $1, 000 universal bill with no aid to local governments, a proposal that Democrats may find hard to stomach
The $618 billion stimulus plan unveiled by Republicans early Monday is about a third of the size of the president’s proposal. Top Democrats in the House and Senate jointly submitted a $1.9 trillion budget plan on Monday aimed at bypassing Republicans to pass a new pandemic aid plan.
Democratic congressional leaders in the US have launched a quick confirmation process for a new bailout plan, a fast-track process that allows them to pass the plan without the support of Republican lawmakers.
On the other hand, the situation between China and the United States in the day out of new news. Member of the Political Bureau of the CPC Central Committee, Yang jiechi, said on Tuesday that the Chinese government always maintain stability and continuity in the policy, willing to work with the United States to promote china-us relations along the no conflict no confrontation, mutual respect, cooperation and win-win developing track, and at the same time continue to resolutely safeguard China’s sovereignty, security and development interests.
Yang stressed that as long as the two sides proceed from the fundamental interests of the two peoples and the people of the world, adhere to mutual respect, seek common ground while shelving differences, effectively manage differences and expand common interests, “China-U.S. relations will surely be able to embark on the path of improvement and development and bring benefits to the two peoples and people around the world.”
In currencies, the dollar remained near the 91 level, while non-U.S. currencies were mixed after the Reserve Bank of Australia (RBA) left interest rates unchanged but said it would expand its bond-buying program by A $100 billion. The Aussie pared gains. Some market participants had thought the decision might not be announced until next month.
“US interest rates are likely to rise due to fiscal stimulus and the US economy doing well,” said Moh Siong Sim, currency analyst at Bank of Singapore. “The weakness in the dollar has also stalled and the dollar/yen slide, which has been part of this trend, has lost some momentum.”
In commodities, silver, which has recently been the focus of the retail army, is recovering its cool, extending its decline to more than 4 per cent from its peak, while gold has followed silver lower, losing $1,850.
The move came after the Chicago Mercantile Exchange stepped in to raise margin requirements for silver futures, a move that was tempered by yesterday’s surge in silver prices, which stopped after hitting $30 a barrel.
UBS’s latest outlook: Investors’ appetite for gold is expected to wane this year, but broad dollar weakness will support gold prices at $1,800 / oz through 2022. Gold prices will rise above $1,900 / oz in the first half of 2021, then fall back to $1,800 / oz in early 2022.
Trend analysis of major currencies:
EUR: The euro/dollar is now trading around 1.2070 as it tries to stabilise after losing ground at the 1.21 level yesterday. Technically, the MACD green momentum column is starting to weaken on the 4-hour chart, with the RSI holding steady below 50 and the KDJ indicator heading down to the oversold level, indicating that prices are slowing down or stabilizing higher in the short term. Initial short-term support stands at 1.2040, initial resistance is seen at 1.2100.
GBP: GBP/USD is hovering around 1.3675 after two days of losses. Technically, the MACD green momentum column is weakening on the 4-hour chart, with the RSI holding steady near the 50 level and the KDJ indicator heading down towards the oversold level, suggesting prices may stabilize in the short term. Initial short-term support stands at 1.3630, initial resistance is seen at 1.3720.
JPY: USD/JPY consolidated after four straight days of gains and is trading around the 105 mark. Technically, on the 4-hour chart, the MACD red momentum column is weakening, the RSI indicator is hovering near overbought levels, and the KDJ indicator is touching overbought levels. Price bullish momentum is expected to slow or consolidate further. Initial short-term support stands at 104.60, initial resistance stands at 105.45.