GENEVA — The S&P500 (+0.36%) and Nasdaq (+0.76%) advanced to new records on Tuesday, as investors continued betting on accommodative Federal Reserve (Fed) policy to redress the US economy that has been ravaged by the pandemic, but Fed Chair Powell's Thursday's speech in Jackson Hole meeting may remain short of the very dovish market expectations and trigger a downside correction at the current levels. Airline shares, which led Monday gains, were sharply sold, as companies prepare to announce by how much they will shrink operations once the federal aid expires on Oct. 1 and the numbers will be ugly. Equities in Asia failed to follow up on US session gains. Major Asian indices edged lower on lingering uncertainties regarding the global economic outlook. The latest data showed that new home sales in the US rose sharply in July (+13.9% m-o-m) to reach the highest since 2006, but the average American household remains squeezed by slow business activity and the delay in government help. The US consumer confidence dived to a six-year low in August. Due Wednesday, the US durable goods orders are expected to have risen 4.3% in July. A softer-than-expected figure should revive the Fed doves, while a better-than-expected read would improve the investor mood, but should not have a material impact on dovish Fed expectations as it is clear to everyone that the economy needs sustained support for posting good results. The US dollar remains steady near the 93 mark, but the treasuries are dumped. The US 10-year yield advanced above 0.71% as capital moves to risky equity markets for better returns. Capital leaves gold as the risk rally intensifies. The price of an ounce fell to $1914 on Tuesday, as US equities hit new records. The upbeat US sovereign yields encourage selling as well. But dip-buyers are seen near the $1900 mark as the actual risk rally starts feeling uncomfortable in the absence of any additional aid plan from the Fed, or the government. Meanwhile, the US-China trade talks seem to progress as China reiterates its commitment to reach its phase-one promises despite a lot of political noise around China's Xinjiang and Hong Kong policies and the tech war. According to the latest news, the two countries would be discussing next steps in trade negotiations, including the protection of intellectual property and obstacles to US financial services and agriculture. But investors prefer to wait and see given the sudden and drastic changes in the tone and the direction of US-China negotiations. The EURUSD treads water near the 1.18 mark, awaiting a fresh direction from the US dollar. On the other hand, the rising COVID cases across Europe increase the doubts regarding the European recovery trades and provides a stronger case for a softer euro against the greenback. But the dollar bears need to give in to allow a meaningful downside correction in EURUSD. The next negative target stands at 1.1685, the 23.6% Fibonacci retracement on March–August rebound. Cable continues being bought near 1.3050 and sold past 1.32. The USDJPY advanced to three-week highs on the back of a stronger risk appetite and outflows from the safe haven yen. WTI crude jumped to $43.60 per barrel as the Tropical storm Laura strengthened into a hurricane threatening the US refineries along the Texas-Louisiana coast. It is said that the US refineries could lose as much as 12% of their capacity for more than six months. Also, the weekly API data showed a 4.5-million-barrel decline in US weekly inventories, versus a draw of 2.7-million-barrels expected by analysts. Lower supply news should give support to oil prices in the short run, but supply-side news tends to have an ephemeral positive impact on oil prices. The global oil market remains swamped with excess supply and prospects of slow recovery in global demand should cap the upside potential in oil prices approaching the $45 per barrel. — The writer is senior analyst at Swissquote Bank