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From the Floor: 'This is not necessarily over' — #SaxoStrats

   • Asian stocks soft after US posts strong Tuesday recovery
   • '2,530 is our line in the sanf for the S&P 500': Hardy
   • EURUSD holds the line, 1.23 the key support area
   • Crude oil recovers following API release
   • 'WTI needs to hold $62.50/barrel': Hansen

By Michael McKenna

US stocks bounced impressively Tuesday after their worst two-day rout in years, but Saxo Bank head of forex strategy John Hardy points to a weak subsequent APAC session as a potential signal that the recovery may not prove as perfectly V-shaped as bulls might want.

"It will be interesting to see what European bourses do today; our line in the sand for the S&P 500 is 2,530," Hardy adds.

In the FX space, Hardy reports that currencies were relatively muted throughout the sudden return of volatility with JPY proving the most correlated to risk. In EURUSD, Hardy tells as that the benchmark pair surived the storm intact and points to 1.23 as the key level of support.

S&P 500:
S&P 500
Source: Saxo Bank

Crude oil posted a late-day recovery along with stocks with the key catalyst being a reported drop in inventories from API. In Saxo Bank head of commodity stretagy Ole Hansen's view, oil remains challenged by the seasonal demand slowdown, elevated speculative longs, and the continued shadow of risk-aversion; "WTI needs to hold $62.50/barrel," he reports.

Gold prices are tracking lower in line with the US recovery, but Hansen points to Goldman Sachs' recent call for $1,375/oz by year-end, noting that political instability in the US as well as broader geopoltical faultlines remain supportive of XAU.

Is the worst of the volatility spike now behind us? Photo: Shutterstock

Michael McKenna is head of editorial content at Saxo Bank 


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