Market Analysis

The US dollar is once again recording losses

FOREX

The US dollar is once again recording losses to other major currencies, especially in the case of the traditional safe haven yen, which traded at 107.27 versus the greenback during the early part of Thursday’s session. Despite a splutter of positive US data released on Wednesday, which once again showed that the American economy remains strong and triggered something of a dollar rally, today the greenback is once again under pressure as the markets, spooked by the potential impact of the coronavirus on global economic growth, eye further easing action by the Fed in the not-too-distant future.

Ricardo Evangelista – Senior Analyst, ActivTrades


GOLD

The gold price is holding on to $1,640. After a quick jump yesterday above $1,650, the price declined to $1,630 due to the recovery of S&P 500 and other US major indices. This morning, with European indices in red, bullion was able to recover to $1,640. After a few days of direct correlation with stock markets – due to the Fed’s decision to cut interest rates from 1.75% to 1.25% – we are back to the usual inverse correlation. In other words, gold traditionally performs best when stocks are falling.

A fresh climb above $1,645 would offer a strength signal for bullion, even if this scenario remains strongly linked to the latest updates on coronavirus and its impact on stock markets.

Carlo Alberto De Casa – Chief analyst, ActivTrades


OIL 

It might be that further reductions in interest rates and fiscal stimulus could put a temporary patch on the current economic situation. However, unlike in 2008, this time the Fed is starting with already very low interest rates, and therefore does not have much ammunition to fight the financial pressures of a global economy that is already in slowdown. In other words, with such low rates, they won’t be able to buy much time. In addition, seeing the price of crude oil close to historic lows, and the gold near highs, it seems that the markets for commodities and safe haven assets are already acting in a recessionary manner. It seems it is just a matter of time before highly defended stock market bubble deflates again.

Andres Gago Nunez – Account Representative, ActivTrades

 

EUROPEAN SHARES 
This week’s mixed tone towards European shares and to risk assets in general continues on Thursday. Even if the recent price action on most benchmarks reflected a calmer environment, volatility levels remain high. Investors are still digesting the wave of monetary responses from central banks and nations around the world to the impact of coronavirus and this has helped prevent markets from trading lower still, at least for the time being. The virus keeps on spreading worldwide with new daily cases registered in almost 85 countries with the state of California even triggering a state of emergency after it recorded 53 new confirmed cases. Despite actions being taken by most economic zones, market sentiment remains very fragile and downside risk still exists on most share markets. Elsewhere, traders may expect a volatility surge on energy shares as uncertainty reigns on oil markets following the split decision between Russia and Saudi Arabia on possible deeper production cuts in response to the impact of the Chinese virus. All of the European benchmarks are trading slightly lower today with the worst performance coming from the FTSE-100 Index and the DAX-30 of Frankfurt. Both indices are showing a similar configuration (see attached chart) where the recent bearish trend is being interrupted by this week’s consolidation phase. Technically speaking, there is still no sign of a trend reversal as markets consolidate laterally without registering any new significant high.

Pierre Veyret– Technical analyst, ActivTrades

*The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication. All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.