Crude Oil, Asia-Pacific Stock Markets, Coronavirus – TALKING POINTS
- EUR/USD surged, regional credit spreads narrowed after EU summit deal was announced
- USD and JPY were punished. Risk-on market dynamics may push Asia-Pacific stocks higher
- Crude oil prices could rally if Brent breaches 45.51. This level marks the pre-March plunge
Stocks on Wall Street ended mostly higher with the Dow Jones and S&P 500 index up 0.60 and 0.17 percent higher while the tech-leaning Nasdaq index closed 0.81 percent lower. Foreign exchange markets reflected a clear risk-on tilt, with the Australian and New Zealand Dollars – along with the petroleum-linked Norwegian Krone as the session’s winners.
Their victory came at the expense of the haven-linked US Dollar and anti-risk Japanese Yen. Commodities generally benefited from the optimistic environment, with Brent and copper both closing just slightly above 1.60 percent. EUR/USD surged after the 27 EU leaders were finally able to ratify a EUR750 billiom agreement after days of deliberation kept market participants in suspense.
The agreement not only marks a significant push towards greater European integration, but the asymmetric risk of no deal could have roiled regional markets and rippled out beyond sovereign borders. This helps explain why the Euro experienced a kind of relief rally, particularly versus the US Dollar in an environment where demand for havens continues to dwindle.
Wednesday’s Asia-Pacific Trading Session
With a relatively sparse data docket, investors will likely continue to direct their trades in accordance to the prevailing optimism in sentiment. Under these conditions, Brent may retest resistance that hasn’t been reached since the pre-OPEC plunge in March , and the Euro may extend its gains with Asia-Pacific equities. Regional credit spreads on corporate debt may also narrow in conjunction with a continued selloff in USD and JPY.
Crude Oil Price Analysis
Brent crude oil prices are within spitting distance of the pre-OPEC meeting selloff in March that marked the biggest one-day drop in the commodity’s history. A break above 45.51 with follow-through could inspire additional sellers to enter the market and push it higher. From a fundamental perspective, it could also speak to a modest but notable recovery in demand for a key energy input as a sign of economic stabilization.
Crude Oil Prices – Daily Chart
Brent chart created using TradingView
--- Written by Dimitri Zabelin, Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitriTwitter