Date: 04 May 2020
The dollar is in demand at the start of Monday’s European session with investors looking for a safe haven amidst an escalation in tensions between the US and China. The greenback’s gains result from market anxiety that the trade conflict between the world’s two largest economies may once again take over the international agenda, following allegations from American officials, including the President and Secretary of Defence, that the coronavirus comes from a lab in Wuhan. Donald Trump went as far as to threaten China with retaliatory tariffs, which could trigger a renewing of last year’s trade tensions, compounding the fears of many investors, who are already shell-shocked by the economic impact of the coronavirus, and driving the appetite for refuge assets.
Ricardo Evangelista – Senior Analyst, ActivTrades
Gold’s price activity on Friday could have offered an important signal to markets. Investors once again confirmed that they are buying every single dip of bullion as the general uncertainty continues to offer a bullish scenario for gold price. The support placed at $1,670 is now even stronger with the price continuing its slow dance just above the psychological threshold of $1,700. We would have another bullish signal if the price managed to clear the recent highs at $1,730-$1,735. Overall gold is clearly performing its safe haven asset role in a market where volatility remains high and the next bear movement for stocks could be just around the corner if the virus comes back with a second wave.
Carlo Alberto De Casa – Chief analyst, ActivTrades
Share markets drifted significantly lower almost everywhere around the globe on Monday, extending last Friday’s losses with a clear switch to “risk-off” mood so far in May. Despite April’s 7-10% rally on stocks, investors’ attitude is driven by a number of negative signs from a variety of sources. A series of mixed earnings combined with poor economic data and the fear of a second virus wave after countries will ease lockdowns has led to a “cautious” or “protective” trading approach from investors. Furthermore, tensions between Beijing and Washington are on the rise again with President Trump promising a “very conclusive” report on the outbreak and China’s role in it, which makes traders afraid of deepening tensions between the two blocs. Investors are realising that April’s rally may have been built on exacerbated optimism about the end of the crisis, and even if no bearish driver seems to be powerful enough to send prices below this year’s lows registered in March, it is still possible for there to be a very sharp correction in May.
The Stoxx-50 Index opened with a 100 points wide bearish gap, below both its bullish trendline and 55-day moving average as well as the 23.6% Fibonacci level, which now forms a resistance level to the market, with the next targets at 2,780pts and then 2,735pts.
Pierre Veyret– Technical analyst, ActivTrades
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