Risk Appetite Deteriorates Again as Iran Attacks US Military Bases

Equities Turn South, Oil and Gold Rally, as Iran Attacks US Bases in Iraq

The dollar traded higher against all but one of the other G10 currencies on Tuesday and during the Asian morning Wednesday. It gained the most against AUD, NOK, and SEK, while it eked out the least gains versus CHF and CAD. The currency against which the greenback underperformed was JPY.

WTI Crude Oil — Technical Outlook

WTI soared overnight following the Iranian attacks, breaking above Monday’s peak of 64.75. However, the rally was stopped slightly below the 65.70 hurdle, and then, the black liquid retreated to give back a large portion of the attack-related gains. Overall, WTI continues to trade above the upside support line drawn from the low of November 29 th, and thus, we would consider the near-term outlook to be cautiously positive.

Gold — Technical Outlook

XAU/USD surged as well overnight, breaking above Monday’s high of 1588, to hit resistance at 1611, a level last seen back in March 2013. Then, it retreated back near 1588. On the 4-hour chart, the precious metal is printing higher peaks and higher troughs above an upside support line drawn from the low of December 22 nd, and therefore, we would see a positive near-term picture.

As for Today’s Events

Ahead of Friday’s NFPs, we get the US ADP employment report for December. The report is expected to show that the private sector has gained 156k jobs, more than doubling November’s 67k print. This could raise speculation that the NFP number, due out on Friday, may also come near its forecast, which is at 160k. However, we have to repeat for the umpteenth time that the ADP is far from a reliable predictor for the NFP number. Even in November, the ADP revealed a 67k job gains, but nonfarm payrolls came in at 266k. Taking into account data from January 2011, the correlation between the two time-series at the time of the release (no revisions are considered) has now declined to 0.41%.

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