Market Analysis

The dollar is standing firm

FOREX

The dollar is standing firm following Jerome Powell’s remarks on the impact of the coronavirus on the global economy’s growth prospects. The Chairman of the Federal Reserve acknowledged the potential spread of the disruption happening in China to the rest of the world, but didn’t mention any change in the central bank’s outlook for the American economy. The positive tone of Mr Powell’s speech drove a positive sentiment through markets and supported the American currency, with the greenback climbing to a 3-week high against the Japanese yen, which is widely seen as the supreme safe haven currency.

Ricardo Evangelista – Senior Analyst, ActivTrades


GOLD

Gold has continued to decline, suffering against the strength of the US dollar and a general risk-on scenario. The spread of coronavirus, which has already killed more than 1,000 people in China, is having a mixed impact on gold. Of course, bullion can be seen as a safe haven (and investment demand could grow if the epidemic continues to spread), but there are more elements to be considered as the coronavirus will also have an impact on gold jewellery demand. Indeed, there are estimations that see a decline of 10-15% of Chinese jewellery demand in 2020.

From a technical point of view, the scenario remains unchanged. There is a strong support zone at $1,550 and a fall below that level could be seen as a signal of weakness, while $1,575 is now the first resistance level for the bullion price. Only a clear break through of that zone could open space for a new rally to $1,600.

Carlo Alberto De Casa – Chief analyst, ActivTrades

 

EUROPEAN SHARES 
Shares edged higher almost everywhere in the world today. European markets echoed the bullish trends registered overnight in Asia while all US benchmarks are also pointing to a firm open. This renewed appetite for risk assets comes after good news from China where the rate of the spread of the coronavirus, with less deaths and infections than yesterday, was now decreasing. Market sentiment is being significantly boosted as most investors and analysts now expects the impact of the deadly flu on economies to be short-lived and contained within Q1. In addition, the end of the crisis may be in sight after a South Korean patient successfully recovered using anti-HIV medication while Chinese authorities announced a vaccine could be ready in 12 to 18 months. An air of relief is now blowing over share markets around the world with traders also welcoming the way China handled the crisis financially with its cash injections, and this has helped keep market confidence in place.

In the meantime, Jerome Powell provided a mixed tone yesterday by stating that the US economy is in a good place but that downside risks to growth, despite having diminished, still exist.

Retailers and automakers are among the best performers in the eurozone but all sectors are also trading higher. The DAX-30 Index is today’s top mover in Europe with the market trading over 13,700pts for the first time in its history. However, the technical configuration isn’t very reassuring as prices are still evolving inside a broadening formation pattern that typically points to growing uncertainty and therefore raises the potential for a trend reversal or deep market correction.

Pierre Veyret– Technical analyst, ActivTrades

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