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A new Sino-American conflict is surfacing

4 May 2020 05:32 PM

Markets are in a state of calm in the absence of important economic data and events, but attention remains on oil prices, the recent volatility in light of the closure of global economies, and the world’s management of the unprecedented crisis.

With the beginning of trading this week, oil prices witnessed a decline given fears regarding continued oversupply and the beginning of a new dispute between the United States and China over the origin of the virus. This despite the start of the process to ease closures associated with the coronavirus epidemic that has swept the world since the end of last year.

Brent crude prices fell to the level of $25.50 a barrel before rebounding up to $26.60 and currently stabilising at the $26 level. US crude contracts returned to test the support level at $18 a barrel before rising and is currently stabilising at the level of $19.35 a barrel (the neck level represents a double bottom model).

The Goldman Sachs Foundation raised its expectations for Brent crude prices for the year 2021 to $55.63 a barrel from $52.50 and for West Texas crude to $51.38 from $48.50. This is due to production cuts by OPEC+ in addition to a partial recovery in global demand.

On the other hand, the US dollar rose in light of fears of a renewed Sino-American conflict, with US dollar index contracts rising to their highest levels since April 30 at 99.50. This is due to the possibility of a conflict after Trump and his foreign minister put the blame for the coronavirus on China.

In the absence of important economic data today, the movements of most currencies came in narrow ranges except for the Chinese yuan, which recorded its lowest level in six weeks against the US dollar at 7.1555 in the foreign market.

Markets are watching the Reserve Bank of Australia’s interest rate decision early tomorrow morning. The bank is expected to keep it unchanged at 0.25%. For its part, the Australian dollar recorded a rise against its US counterpart, reaching the level of 0.6432, its highest since Friday, before retreating to 0.6400.

The pound continued its decline against the US dollar in light of the dollar's strength, as previously mentioned, to reach 1.24, its lowest level since April 29. The pound recorded a 1.4% increase against the dollar in April. The pound usually rises annually each April, except it hasn’t for the past two years, until now.

As for the yellow metal, gold contracts continued to decline, recording the lowest levels at $1676.20 since April 21 during a trading session on Friday. It is noted that prices are moving through a head and shoulders pattern, and the decline is expected to continue targeting lower levels.

As for spot prices, they still resist the $1,700 level and while remaining below this level, may return gold to a decline. News regarding the early development of a coronavirus vaccine or even announcements regarding clinical trials for a new treatment drug will cause a drop in prices, while the continued tension between China and the United States may support a rise in gold prices, possibly to the levels of $1,800 an ounce.

 

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