Risk assets had a relief rebound overnight, as geopolitical tensions eased following President Trump’s statement on Wednesday that the US would not respond militarily to Iran’s attacks on US bases in Iraq.

US will instead carry out ‘punishing economic sanctions’ while it evaluated ‘options in response to Iranian aggression’. Meanwhile, he emphasised that Iran would never be allowed to have a nuclear weapon.

This statement helped to rule out an immediate escalation in the situation and calmed investors down. As geopolitical risk receded, gold and crude oil suffered heavy selloff overnight, reversing their bullish trend.

Gold lost more than 1% and retraced back to a key support level at around US$ 1550 area. Technically, it may consolidate at around US$ 1,543-1,555 area looking for support. Despite falling geopolitical uncertainty, a sense of cautiousness remains in traders’ minds. This puts gold price in a good position to regain favour should any unexpected event happen.

Crude oil fell 4% last night and registered a huge 9% intraday swing yesterday. Technically, US$ 66.2 (61.8% Fibonacci retracement) may provide some support for Brent. Its uptrend has broken down as SuperTrend (10,2) has flipped downwards. A deeper pullback could point to US$ 64.4 (50%) and then US$ 62.6 (38.2%) area.

The S&P 500 index climbed 0.49% on Wednesday, led by information technology (+1.03%), communication (+0.69%), healthcare (+0.64%) and financials (+0.54%). Energy (-1.74%) was the worst performing sector due to oil’s pullback. This could serve as a good indicator for Asian trading today.

The US ADP private payroll rose by 202k in December, smashing Reuter’s expectation of a 160k increase and signals strong momentum in the labour market; in particular across construction and service-related industries. This upbeat report comes in ahead of Friday’s non-farm payroll release, which expects some 164k new jobs. US dollar index climbed to 97.0 from 96.6 a day ago.

Currency wise, USD, JPY, CHF and NZD were among the weakest G10 currencies this morning.

Crude Oil Brent - Cash




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