investingLive Americas FX news wrap 20 May:USD moves lower helped by yields & oil falling.

• Major US stock indices close sharply higher ahead of Nvidia earnings
• Nvidia earnings after the close. What to expect.
• Labour Wes Streeting is likely to abandon bid for PM and support Andy Burnham
• FOMC Minutes: Many would have preferred to remove easing bias from policy statement
• US sells $16 billion of 20 year bonds at a high yield of 5.122%
• Iran Foreign Minister: Focus is on ending the war and fulfilling Iran’s clear demands
• OpenAI preparing to file for an IPO very soon
• Trump: US in final stages in talks with Iran
• Iran News: Foreign Minister says negotiations with the US are ongoing through Pakistan
• Sources: ECB rate hike very likely in June
• Weekly crude oil inventories fall -7.863M vs -2.942M estimate
• Comments from Trump: On Iran, I am in no hurry. Netanyahu will do what he wants him to do.
• BOE Bailey: Financial market tightening gives us some time to assess raiseing rates or not
• The USD is little changed/mixed to start the North American session. What levels to watch?
• investingLive European markets wrap: A little risk respite as Nvidia earnings eyed

The major US stock indices closed sharply higher today as investors embraced a more optimistic tone surrounding the geopolitical tensions between the US and Iran. The market narrative appears to be centered on two potential outcomes: either diplomatic progress that reduces the risk of a broader conflict, or, if military action continues, expectations that it remains limited and short-lived. That combination helped ease some of the fear premium that had built into markets over recent sessions and sparked a strong rebound in risk assets. Lower oil prices and sharply declining Treasury yields added further support to equities throughout the North American session.

The small-cap Russell 2000 index led the gains with a surge of more than 2.3%, reflecting a broad-based improvement in risk sentiment and renewed appetite for more economically sensitive shares. The NASDAQ index also posted an impressive rally, climbing close to 1.5% as lower yields helped support growth and technology stocks. The S&P 500 advanced roughly 1.0%, while the Dow industrial average also moved solidly higher. The move higher in stocks came alongside a strong bid in the Treasury market, sending yields notably lower across the curve.

The 2-year Treasury yield fell around 8 basis points to near 4.04%, while the benchmark 10-year yield declined roughly 10 basis points to 4.569%. The move lower in yields reflects reduced demand for inflation protection as oil prices tumbled and traders pared back concerns over a prolonged supply disruption in the Middle East. Technically, the next major targets for yields are psychologically important levels near 4.00% for the 2-year note and 4.50% for the 10-year note. A sustained break below those levels could encourage additional buying in bonds and provide another tailwind for equities and other risk assets.

Crude oil prices were one of the biggest stories of the day. WTI crude oil futures settled at $98.26, down $5.89 on the session, while Brent crude fell $6.26 to $105.02. The sharp decline reflects fading fears of an immediate escalation that could significantly disrupt global energy supplies. For the broader market, keeping WTI crude below the key $100 level is viewed as the best-case scenario, as it would help alleviate concerns about renewed inflation pressures and their impact on central bank policy expectations.

From a technical perspective, crude oil remains in a critical area. On the topside, the 200-hour moving average comes in at $100.62, while the 100-hour moving average is at $101.72. Those levels now represent important resistance targets that sellers will likely lean against if prices attempt to rebound. On the downside, an upward-sloping trend line on the hourly chart cuts across near $96.34. A move below that level would increase the bearish bias and open the door for a deeper correction toward the 38.2% retracement of the May rally and a prior swing low near $93.74.

In the forex market, the USD moved lower with the “risk-on” pairs (AUDUSD and NZDUSD) leading the charge. The CAD was the weakest of the major currencies. Below is a look at the USDs declines vs the major currencies from the largest decline (-0.68% vs the AUD) to the smallest decline (-0.01% vs the CAD):

• AUD -0.68%
• NZD -0.67%
• GBP -0.35%
• CHF -0.27%
• EUR -0.22%
• JPY -0.11%
• CAD -0.01%

IN other markets gold and silver were supported by lower yields and the move lower in the USD.

• Gold rose $62 or 1.38% at $4546
• Silver rose $2.31% or 3.12% at $77.63.

Bitcoin is trading up $660 at $77640.

Nvidia earnings are forthcoming. Will they give markets a boost ahead of open tomorrow?

This article was written by Greg Michalowski at investinglive.com.