It has certainly been another volatile and unpredictable trading week for financial markets, as heightened geopolitical tensions have left investors on edge. President Donald Trump’s market shaking tweets have not helped matters, with global equity markets violently whipsawing in recent days. As the trading month progresses, global risk appetite is poised to remain extremely fragile and highly sensitive to the Russia-U.S tensions over Syria.
Asian stock markets were cautiously higher this morning, after U.S President Trump appeared to soften his approach to Syria and made a U-turn on protectionist policies. In Europe shares were somewhat supported, as concerns over the conflict in Syria eased. Although U.S stocks could extend gains this afternoon on strong earnings optimism, market anxiety is likely to create headwinds for equity bulls down the road.
With geopolitical tensions and heightened political uncertainty still weighing on sentiment and silently eroding risk appetite, stock markets remain vulnerable to heavy losses.
Gold Bruised But Continues To Shine
This has been a roller-coaster trading week for gold, with the metal displaying high levels of sensitivity to geopolitics and U.S interest-rate hike expectations.
While heightened political tensions between the U.S and Russia have supported the yellow metal, expectations that the Fed will adopt a more aggressive approach over U.S interest rate hikes this year has capped upside gains. With uncertainty still a major market theme and investors clearly on edge, gold is likely to remain buoyed in the medium term.
Taking a look at the technical picture, the metal is under pressure on the daily charts. Although prices have secured a daily close below the $1340 support level, the candlesticks remain above the 50 Simple Moving Average. Sustained weakness below the $1340 level could encourage a decline towards $1324. Alternatively, a breakout above $1340 may result in an appreciation back towards $1360.
Commodity Spotlight – WTI Oil
Oil prices were incredibly bullish this week, as escalating tensions in the Middle East fueled concerns of potential supply disruptions.
The upside was complemented by encouraging statements made by the IEA (Institute of Economic Affairs) saying that OPEC was on the verge of clearing the global oil glut. Price action suggests that oil prices could edge higher near-term amid geopolitical tensions and optimism over OPEC supply cut rebalancing markets. However, rising production from U.S Shale could create obstacles for oil bulls down the road. From a technical standpoint, WTI Crude has scope to test $68.00 if bulls maintain control above $66.50. A scenario where prices are unable to stabilize above $66.50 could result in a decline back towards $64.00.
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