September 22: Overnight Market Wrap

September 22: Overnight Market Wrap

Key Points:

Metals lead rout as risk assets hit across the board, Silver off 10%

US indices all closing in the red but off the lows

USD rallies back after recent weakness as DXY pushes higher to 93.50

Nervousness continued to impact risk assets at the start of a new week carrying on from last week. A number of catalysts can be pointed at with coronavirus cases on the rise globally as we head towards a northern hemisphere winter and likely further lockdowns the biggest threat. The US political storm surrounding the appointment of a new Supreme Court and its impact on the US election, continued delays to further US stimulus, Brexit and the ongoing trade disputes with China are all adding to it. All major US indices fell horribly during the day but managed a late bounce. The Dow closed down 500 points and S&P500 -1.16%, incredibly the Nasdaq was the best performer down a measly -0.13% after staging a late 2% rally. Fed’s Powell reiterated the Fed will do what it can for as long as it can and Williams and Bostic were keen to push further stimulus responsibility onto the government. The USD saw its biggest one day strength in almost 4 months pushing the DXY back above 93.80 at one point before settling back lower into the close. The commodity bloc currencies got hit hardest as they’ve been the biggest beneficiaries to the weaker USD, however EUR and GBP also fell sharply, whilst USD/JPY struggled to rally. ECB’s Lagarde comments that the ECB are attentive to the exchange rate added to the downward pressure. Key support for the EUR sits at 1.1695/00 now and below there we could see some long positions bail. AUD having pushed back to 0.7325 during the Asian session fell back to dip below 0.7200 at its weakest point, NZD the weakest on the day -1.39% and CAD also lower further impacted by WTI down 2%. Metals had a big move, Copper lost some of its gloss, Iron ore dropped 4.2% and in the precious sector Silver was down 10.1% on the day and Gold, despite hitting 1952 highs during the Asian session fell dramatically through the triple bottom of 1900/05 to touch 1882 before bouncing, closing at $1911. No data to excite Asia today with Japan out for a public holiday once again. Stocks are likely to be nervous after the US fallout and likely to dictate price action. RBA’s DeBelle will talk this morning at 1030AEST and in the European session we will hear from BoE’s Bailey likely to highlight the uncertainty in the UK economy with Brexit and Covid. Powell and US Treasury Secretary Mnuchin will be grilled by lawmakers around further stimulus during the US session later today.

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