Gold and silver prices soar as US-China tensions escalate
The euro continued rallying a day after European Union leaders agreed to a landmark recovery fund deal. The currency rose to its highest point since October 2018 against the US dollar and to its highest level since July 3 against the sterling. While the deal still has to go through local legislatures, investors believe that it will go through. Countries will start receiving the funds in the first quarter of 2021. Still, they are worried about the increasing rift between the frugal member states and their southern counterparts.
Gold and silver prices rose to multi-year highs as investors reacted to stimulus news and new tensions between the United States and China. Silver price reached an intraday high of $22.80 while gold reached a high of $1,865. In a statement after meeting White House officials, Senator Mitch McConnel said that the economy needed another round of stimulus as it battled the virus. This means that Republicans in Senate and Democrats in the House could reach a deal. Traders view stimulus as being negative for the US dollar. Meanwhile, the rising tensions between the US and China pushed precious metals higher. According to the Chinese, the State Department ordered China to close its consulate in Houston.
US futures wavered as traders waited for key corporate earnings today. Later today, companies like Microsoft, Tesla, and Baker Hughes will release their earnings. Analysts expect that Microsoft, which is a major Dow and S&P constituent will release upbeat results, boosted by demand for cloud products. This is reinforced by the strong results released by IBM on Monday. Tesla earnings will come at a time when its shares have jumped by more than 100% in the past few months. Other earnings to watch will be from Chipotle, Kinder Morgan, Biogen, and Equifax.
The EUR/USD pair rose to an intraday high of 1.1585, which is the highest it has been since October 2018. On the daily chart, the price is above the 50-day and 100-day exponential moving averages. It is also above the dots of the Parabolic SAR. The RSI has moved to above 70, which is the highest it has been since June 10. Therefore, while the pair is likely to rise, there is a possibility of a pullback happening in the near term.
The XAG/USD pair rose to an intraday high of 22.85, which is the highest it has been in years. On the daily chart, the price is above the short, medium, and long-term exponential moving averages. The RSI, too, has moved to the overbought level. The same is true with the MACD indicator. Therefore, like the EUR/USD pair, the XAG/USD pair is likely to experience a pullback as investors book profits.
The NZD/USD pair rose to an intraday high of 0.6670, which is the highest it has been since January. The price is also above the 50-day and 100-day exponential moving averages. The RSI has risen to the overbought level of 70 while the price is above the 61.8% retracement level. Therefore, the price is likely to continue rising as bulls aim for the next resistance level of 0.6800.