Market Analysis

Oil is building an interesting support

FOREX

The US dollar is enjoying its 7th consecutive session of gains against a basket of other major currencies, with the Dollar Index comfortably above 98.7, the highest it has been since October 2019. The greenback’s gains reflect, to some extent, the consolidation of the American currency as a safe haven in the eyes of traders unsettled by the unknown risks posed by the coronavirus to the growth of the global economy. The uncertainty is generating unusually low volatility in foreign exchange markets and in such a scenario, FX traders look to hold higher yield currencies, with the greenback being especially appealing in this respect.

Ricardo Evangelista – Senior Analyst, ActivTrades


OIL 

Oil is building an interesting support level at $50 a barrel. In early trading this morning, WTI is attempting a modest rebound, although the major trend remains bearish. It seems quite clear that investors are still cautious about taking any long position on oil as the impact of the coronavirus is unclear and could have a huge impact on oil demand. Technically the price has broken through last week’s key support area of $51 and we are now moving in a risky area for WTI as a clear fall below the support zone of $50 could open doors for another sell-off. We would have a first positive signal if the price can recover to at least $52.20, while a rally to $54 set oil on course for a complete turnaround. However, as mentioned earlier, at this point the main trend remains negative.

Carlo Alberto De Casa – Chief analyst, ActivTrades

 

EUROPEAN SHARES 
European shares opened higher on Monday after a resurgence of the risk-on tone sent US indices to historical highs before yesterday’s closing. Despite the coronavirus death toll having risen above 1000, investors have been reassured by the slowing of the number of new cases. Furthermore, investors also welcomed the fact that a candidate vaccine has been tested on animals according to the Chinese Centre for Disease Control and Prevention. Even if this vaccine is still at very early stages of its development, it remains positive news for the fight against the deadly virus and will certainly boost market sentiment in the coming days and weeks. Finally, investors may also be pricing a dovish speech from the Jay Powell later today as the Fed Chairman is expected to give his view on the impact the coronavirus has had on global growth. However, a rate cut, which has been suggested by certain members as a short-term adjustment policy, remains very unlikely at this stage.

Carmakers and miners have helped drive the Euro Stoxx-600 higher today while the DAX-30 Index is flirting with historical highs near 13,600pts. The FTSE-100 benchmark is the best performer so far and is now trading above the 7,500pts level. The market will have to clear the 7,515pts to 7,540pts zone in order to unlock a new bullish potential towards 7,585pts and 7,630pts.

 

Pierre Veyret– Technical analyst, ActivTrades

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