The Nikkei Index Plunged, Implicating Crude Oil and Gold

WikiFX News (16 June)-Yesterday, the Nikkei index plunged, and the hedging sentiment of the financial markets caused prices of both crude oil and gold to fall.

The fall in gold and other risk assets may reflect the rise in the US dollar or weakened the attractiveness of fiat currency alternatives. The unmatched liquidity of the US dollar often makes it a beneficiary of capital flows that seek hedging.

The Japanese stock market suffered a greater loss compared with other regional stock markets, and stocks in the industrial products, consumer and technology sectors have contributed to the sharp decline. To sum up, this makes the price trend cyclical and may reflect concerns about the global economic recession. The S&P 500 stock index futures, a risk indicator, fell sharply before US stocks opened, warning that market risk aversion may go on heating up.

In terms of crude oil prices, bears are currently threatening the 34.78 support level. If the intraday price closes below this level, it will fall further to the turning point at around 27.40-29.11. The recent resistance is within 42.40-43.88 area and if oil price breach through this level, the next target will likely be US$50 per barrel.

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