Hi-ho silver! Away!

The Lone Ranger galloped into town upon Silver overnight, precious metals markets are seeing fireworks this morning after plenty was also seen yesterday. Silver prices exploding higher, threatening to drag gold out of its multi-week malaise – more on this below.

Meanwhile, the buy-everything trade was back with a vengeance overnight and perhaps rightly so. Markets were booster shot-ed by positive news from Astra-Zeneca regarding the progress of their Covid-19 vaccine. The European Union also lent a helping hand, edging towards a workable pandemic recovery package. The net effect immune boosted equities and commodities, and spurred a new wave of US Dollar rotation, as the street priced in more light at the end of the pandemic economic tunnel.

The vaccine news was particularly welcome, capping a slew of positive news from that sector over the past week. My reverse Black Swan continues to be that a vaccine arrives in Q3 with distribution beginning shortly after that. The world won't have dodged an economic bullet but may get away with a flesh wound that can be staunched without surgery.

The news, however, isn't all positive. Far too many people around the world are still testing positive for Covid-19, and the situation in the United States, a particular concern. Fears of extended or new lockdowns saw Amazon and Zoom outperform overnight, lifting the Nasdaq to an outsized outperformance day. The bearish outside reversal formation on the Nasdaq I highlighted last week is well and truly consigned to the dustbin. Momentum rules and big tech has plenty of it.

China stock markets outperformed yesterday, rising by over 3.0% on the day. The regulator lifted the cap on the amount of domestic equities; Chinese insurers can hold. That increased from 30 to 45% of total assets, as at the end of the previous quarter. It caps a busy month for Central Government involvement in the onshore equity markets. They were firstly urging retail investors to get long to partake in China's recovery, then getting cold feet a week later after a 13% rally. That led to an almost equally precipitous drop. And now, allowing insurers to buy more equities. The latter makes complete sense, even if the previous two don't. Retail flows dominate equity volumes on the Mainland and allowing more institutional money to participate may help smooth out the headless charges back and forth by the retail crowd.

Hong Kong markets will be boosted by the news that Ant Financial will do a dual-listing IPO in both Hong Kong and Shanghai. It could easily be the largest IPO of the year in terms of cash raised, edging out Saudi Aramco. That has swept the security law clouds from the front pages, for now, boosting hopes that Hong Kong can go it alone with Big Brother's help, even if there is an exodus of foreign and local companies to more friendly climes.

Today's data calendar is incredibly light. The RBA minutes were released, and unsurprisingly, the RBA is happy with monetary policy where it is, isn't concerned about the exchange rate and is watching developments in the world. Japan's inflation data this morning showed that inflation is still missing in action after 25 years. Operations normal. Singapore's inflation data will tell a similar story this afternoon, with MoM rising slightly by 0.50%, but the YoY number firmly anchored in negative territory at -0.80%.

A slew of business and consumer confidence will hit the wires across Europe and today and tomorrow. It should show a generally improving trend as the Eurozone rebounds from its Covid-19 lockdowns. Markets though will continue to focus on the pandemic recovery package details, which should maintain the bullish mode for both the Euro, and European equities.

Equities higher in Asia as Nasdaq rally spills over

The Nasdaq outperformed overnight, as investors piled into Amazon and Zoom and their ilk on the premise that the sector is immune to US Covid-19 pandemic sweeping the country. It adds more weight to the theory that, for now, big-tech is the new safe-haven trade. The Nasdaq rose 2.51% overnight, eclipsing the 0.84% gain by the S&P 500, and the unimpressive 0.03% finish for the Dow Jones Industrials.

After-market Nasdaq futures are higher in Asia by 0.60%, as the big-tech haven trade continues. Combined in a potent cocktail with Covid-19 vaccine hopes, that has lifted stock markets across the region. The Nikkei 225 has climbed 0.65%, the Kospi by 1.35%, Taiwan by 1.40%, with Australia's ASX 200 and All Ordinaries climbing 1.30%. Regionally, Singapore, Jakarta, Kuala Lumpur and Bangkok are between 0.50% and 0.80% higher. 

China is providing a contrasting picture. A more positive international outlook and the impending Ant Financial IPO has lifted the Hang Seng by 1.60% today. In contrast on the Mainland, both the Shanghai Composite and CSI 300 are unchanged. Their performance is likely reflective of consolidation after their respective 3.0% rallies yesterday, however.

The mood in Asian equity markets should remain buoyant for the rest of the day, and rightly so. Against that backdrop, and with the Eurozone on the cusp of a pandemic recovery deal, European stock markets should begin their session with a strong tailwind.

Vaccine hopes give a booster shot to US Dollar rotation

The dollar index fell by 0.20% overnight to 95.82, as the US Dollar renewed its retreat versus developed market currencies. Positive news on the Covid-19 vaccine front, and Eurozone pandemic recovery fund progress, awoke currency markets from their recent slumber. 

The EUR/USD rose 0.30% to 1.1445 overnight and has risen to 1.1465 in Asia as reports emerge that a final Eurozone deal has been agreed. EUR/USD looks set to test 1.1500 in the European session. GBP/USD rose 0.80% to 1.2660 overnight, with Astra-Zeneca's vaccine news. This morning GBP/USD is resting its 200-day move average (DMA) at 1.2695, with a daily close above, opening further gains to 1.2800 in the days ahead.

The trade-centric commonwealth commodity currencies also outperformed. The Australian, New Zealand and Canadian Dollars all rose 0.30%. The AUD/USD has shrugged of dovish comments from the RBA Governor this morning, breaking 0.7000 on its way to 0.7020. AUD/USD now looks set to test its June high at 0.7065.

Onshore Chinese Yuan has also strengthened overnight, with USD/CNY at 6.9900 today. USD/CNY support is nearby at 6.9800 and is likely to break by tomorrow, with a more robust CNY fix by the PBOC almost certain given currency moves today. That would leave USD/CNY poised to drop to the 6.9500 regions.

Regional Asia has been the laggard of late, as economic worries have sapped the strength from the Singapore Dollar, Thai Baht, Indonesian Rupiah and Malaysian Ringgit. The US Dollar weakness seen elsewhere has yet to be seen in regional Asia. That state of affairs is unlikely to continue if all things stay as they are. That should set up a period of outperformance by regional Asian currencies if the bullish sentiment elsewhere maintains its momentum.

Opposing forces becalm oil prices

In comparison to other markets, oil had a quiet night. Oil prices remain contained by fears of a renewed US economic slowdown on the one hand, and vaccine hops on the other. That led to a sideways session for oil with Brent crude inching 0.20% higher to $43.10 a barrel, and WTI creeping 0.50% higher to $40.80 a barrel. Asia has continued in the same tone, both contracts inching 20 cents higher today.

In the bigger picture, despite the extended period of range trading by both contracts, oil continues to consolidate at the top end of its two-month range. Increasing hopes that a solution to Covid-19 is getting nearer sooner, increases the odds that oil's next move is higher. 

A breakout by Brent crude through $44.00 a barrel sets the scene for a possibly rapid move higher to its 200-DMA at $48.00 a barrel. The picture is much the same with WTI. A breakout through resistance at $41.60 sets up a similar move to its 200-DMA at $44.00 a barrel. 

With oil's daily range contracting ever tighter over the past week, a strong directional move appears to be imminent.

Gold lifted by silver bullets fireworks

Gold moved higher by 0.40% to $1817.50 an ounce overnight. A stone's throw away from resistance at 1819.00 an ounce. Gold was lifted by a weaker US Dollar and fireworks in silver, which climbed 3.0% to $19.3300 an ounce overnight. 

Today, all the action is again on silver, which has advanced through $20.00 an ounce, triggering stop-loss buying, jumping 2.0% to $20.3150 an ounce. Liquidity is always an issue with silver, being on average much less than is available with gold on any given day. That partially explains why directional silver moves are usually much more aggressive and grander in scale than those with gold.

Having bottomed under $12.0000 an ounce in March, silver has now risen by 75.0%. Meantime, the XAU/XAG ratio collapsing from 128.00, to 89.634 today. That multi-month fall in the XAU/XAG ratio has likely provided a steady supply of sellers all the way up in gold, possibly slowing its advance. That was probably the case overnight as well with the ratio falling by 2.55%.

However, gold has now advanced to $1819.00 today, with silver's rally inevitably dragging spot gold higher despite the ratio selling. A move through $1820.00 an ounce should see more stop-loss sellers, as well as model-driven buyers, hit the market. That could lead to a reasonably rapid spike by gold into the mid-1830s an ounce, reinvigorating gold's rally.

Bitcoin remains of the radar

Bitcoin has remained entrenched in a $9000.00 to $9500.00 range for over a month. The fall in volatility has led to a decline in participation by get-rich-quick FOMO traders, leading to a self-perpetuating negative feedback loop.

With precious metals marching higher, and signs that the V-shaped recovery trade is about to re-energise, Bitcoin looks poised to retest the bottom of its range, as its anarchist safe-haven appeal fades amongst the tin-foil hat, anti-5G brigade. 

A failure of the $9000.00 real fiat-currency support could see Bitcoin spike to the $8350.00 zone, where both its 100 and 200-DMA's are currently residing.