Date: 19 May 2020
The mood in the markets shifted yesterday, with the sentiment of investors having a much more positive stance than of late and this has benefited the euro with the single currency gaining more than 1% to the dollar since the start of the week. The bullishness is driven by a combination of good news with hopes raised about a vaccine for the coronavirus being available in the not too distant future and the joint proposal by Germany and France for a recovery fund that would be allocated to the EU’s budget. The Franco-German agreement is extremely significant as it could pave the way to some form of debt share, something that has so far been rejected by northern member states including Germany. Should other member states be in agreement we could be looking at a pivotal change in dynamics and that will bring much needed stability to the EU and offer further support to the euro.
Ricardo Evangelista – Senior Analyst, ActivTrades
Gold declined sharply yesterday afternoon as a switch to risk on dominated markets. Rumours about a vaccination against the COVID-19 are diminishing investors’ appetite for safe haven assets. In early trading today, bullion is attempting a recovery but much of yesterday’s strong decline still needs to be absorbed by markets.
From a technical point of view, traders are watching to see if bullion can hold the key support level of $1,725-$1,730. A fall below these levels would increase chances for further declines and could make Friday’s rally a false break up. Otherwise, if the price holds on at $1,730, yesterday’s fall could be absorbed by markets and the bullish trend would slowly recover strength.
Carlo Alberto De Casa – Chief analyst, ActivTrades
Benchmarks in Europe are struggling to extend yesterday’s gains, which was sparked by optimism about a possible vaccine against Covid-19. However, yesterday’s euphoria is now nuanced by today’s uncertainty as investors brace themselves for the Fed Chairman Jerome Powell’s speech, which will provide them with more clues on the state of the recovery and the next action to be taken by the US central bank. In addition, today’s market sentiment is also being tainted by the deteriorating relationship between the US and China, especially after the Nasdaq exchange unveiled new IPO rules that limited the listing of Chinese companies. Traders expecting a response from Beijing are then likely to limit their exposure to stocks and take any profit following yesterday’s rally. With that in mind, we expect markets to stay volatile but without clear direction until Jerome Powell’s speech.
The FTSE-100 Index is today’s best performer as traders welcomed the government’s announcement of tariff cuts worth £30 billion after Brexit. The market is still trading well above 6,000pts despite a failure below 6,080pts. The bullish movement is slowing down, as shown by the Stochastic indicator, and a fall below 6,030pts could drive prices back to the range between 5,945 to 6,000pts. On the flip side, if the index clears 6,080 then 6,125pts and 6,210pts would be the next targets.
Pierre Veyret– Technical analyst, ActivTrades
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