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Oil up 2% on supply worries ahead of OPEC+ meeting

 

“If you are not willing to risk the usual, you will have to settle for the ordinary.”— Jim Rohn

 

HEADLINES

 

 

  • Yen extends recent gains as tensions over Pelosi visit to Taiwan grow
  • Gold extends gains on recession fears, China-U.S. tensions
  • Oil up 2% on supply worries ahead of OPEC+ meeting
  • Wall Street drops on rising U.S.-China tensions over Taiwan
  • U.S Treasury yields move higher ahead of Pelosi’s expected Taiwan visit
  • USD/ZAR: Not yet convinced that the worst is over for the South African rand – MUFG
  • AUDUSD Near Term: Downside favored

 

 

Yen extends recent gains as tensions over Pelosi visit to Taiwan grow

 

The yen was up slightly against the dollar Tuesday, adding to recent gains as increasing tensions over U.S. House of Representatives Speaker Nancy Pelosi's planned visit to Taiwan made investors more risk averse.

China's offshore yuan fell against the dollar, touching its lowest level since mid-May.

The yen strengthened 0.12% versus the greenback to 131.46 per dollar. It was on track for a fifth day of gains against the dollar, its longest winning streak since 2020.

Investors also are keen to see the U.S. monthly jobs report on Friday.

 

 

COMMODITIES

 

 

Gold extends gains on recession fears, China-U.S. tensions

 

Gold rose for a fifth straight session on Tuesday to its highest level in about a month as China-U.S. tensions and fears of a possible recession in America burnished bullion’s safe-haven appeal.

Spot gold was up 0.2% at $1,775.59 per ounce by 12:11 p.m. EDT (1611 GMT). U.S. gold futures gained 0.4% to $1,794.50.

Expectations of toned-down rate hikes and a clear slowdown in the U.S. economy have significantly supported gold, said David Meger, director of metals trading at High Ridge Futures.

Gold is considered as a safe store of value during economic and geo-political uncertainties and typically does well when interest rates are low or near zero.

 

 

ENERGY

 

 

Oil up 2% on supply worries ahead of OPEC+ meeting

 

Oil futures rose about 2% on Tuesday as traders worried that this week's meeting of OPEC+ producers may not lead to a further boost in crude supply.

The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, meet on Wednesday. Two of eight sources said a modest output hike would be discussed. The rest said a boost was unlikely.

OPEC+ trimmed its forecast for an oil market surplus this yearby 200,000 barrels per day (bpd) to 800,000 bpd, three delegates told Reuters.

 

 

STOCKS

 

 

Wall Street drops on rising U.S.-China tensions over Taiwan

 

Wall Street's major indexes fell in choppy trading on Tuesday on rising U.S.-China tensions as House of Representatives Speaker Nancy Pelosi's support to a democratic Taiwan prompted China to announce "targeted military operations".

The latest geopolitical uncertainty comes at a time when financial markets are struggling to grapple with the fallout of the Ukraine war, an energy crisis in Europe, soaring inflation and tightening financial conditions.

Shares of chipmakers with a large exposure to China struggled to gain, while industrial bellwether Caterpillar added to the slide, dropping 4.5% as slowing construction activity in the world's second largest economy added to its supply-chain woes.

 

 

U.S Treasury yields move higher ahead of Pelosi’s expected Taiwan visit

 

U.S. government debt prices traded lower Tuesday morning as investors considered the outlook on future interest rate hikes and monitored U.S. House Speaker Nancy Pelosi’s trip to Asia.

At around 12:55 a.m. ET, the yield on the benchmark 10-year Treasury note rose to 2.701% and the yield on the 30-year Treasury bond rose to 2.965%. Yields move inversely to prices.

Traders absorbed comments from Chicago Fed President Charles Evans, who said Tuesday that the Federal Reserve could proceed with 50 or 75 basis point rate hikes at the central bank’s September meeting should inflation continue to tick lower.

 

 

ANALYSIS

 

 

USD/ZAR: Not yet convinced that the worst is over for the South African rand – MUFG 

 

“The combination of tighter Fed policy and lower commodity prices is an unfavourable combination for the rand. In recent weeks there has been some temporary relief for the rand as global equity markets have staged a modest rebound and US yields have corrected lower. However, we are not yet convinced that the worst is over for the rand. It is premature to expect the Fed stage a dovish pivot in the near-term even as evidence continues to build that the US economy is slowing.”

“The SARB (South African central bank) has recently sped up the pace of rate hikes that is helping to provide more support for the rand. USD/ZAR broke back below the 17.000-level after the SARB delivered a larger 75bps hike on 21st July. It follows a further pick-up in the headline rate of inflation to 7.4% in June. On the other hand, the SARB has become more pessimistic over the outlook for growth next year (+1.3%). Tighter monetary policy and rolling energy blackouts, with outages hitting record levels so far this year, are increasing downside risks to the growth outlook.”

 

 

CHART

 

 

AUDUSD Near Term: Downside favored

 

Technical View: Short position below 0.6965. Target 0.6905. Conversely, break above 0.6965, to open 0.7.

Comments: The pair is expected to resume descend after correction.

 

 

 

 

Source: Trading Central 

 

 

CALENDAR

 

 

*Times in GMT

 

 

 

 

Source: FX Street Economic Calendar

 

 

Footnotes
https://www.reuters.com/markets/us/yen-recovery-continues-lower-us-yields-markets-edge-over-pelosi-2022-08-02/
https://www.reuters.com/article/global-precious/precious-gold-extends-gains-on-recession-fears-china-u-s-tensions-idUSL4N2ZE39O
https://www.reuters.com/business/energy/oil-prices-slip-weak-manufacturing-data-stokes-recession-fears-2022-08-02/
https://www.reuters.com/markets/europe/futures-fall-us-china-tensions-grow-2022-08-02/
https://www.cnbc.com/2022/08/02/us-treasury-yields-move-lower-ahead-of-pelosis-expected-taiwan-visit.html
https://www.fxstreet.com/news/usd-zar-not-yet-convinced-that-the-worst-is-over-for-the-south-african-rand-mufg-202208021642
 

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