Words fail to describe how explosively volatile and chaotic financial markets have been over the past few days.
Fears over a global recession sparked by the coronavirus pandemic are blunting appetite for stock markets with investors rushing to the perceived safety of the Greenback and Japanese Yen. King Dollar has soared against its peers in recent days despite two emergency rate cuts by the Fed with prices hitting multi-year highs above 101.80 on Wednesday. Given how financial markets remain in panic mood and risk-aversion is rife, the Dollar is positioned to extend gains against G10 currencies.
Looking at the technical picture, the Dollar Index is heavily bullish on the four hourly charts. A solid daily close above 101.00 should encourage a move towards fresh multi-year highs above 102.00.
Will the Pound parity dream become reality?
Sterling tumbled to multi-decade lows against the Dollar, falling as much as 4% as the coronavirus outbreak battered financial markets.
On Wednesday, the pound traded below $1.15 against the dollar for the first time since 1985, extending a decline over the past week. With the Dollar expected to dominant the FX arena amid safe-haven flows, the GBPUSD could plunge deeper into the abyss.
Looking at the charts, bears are certainly in control as there have been consistent lower lows and lower highs on the GBPUSD. A daily close under 1.15 may encourage a decline towards 1.14. Should 1.15 prove to be a reliable support, a sharp rebound towards 1.195 could be on the cards.
Another day, another circuit break for S&P 500
The S&P 500 extended its decline on Wednesday, plunging 7% to trigger the level 1 circuit breaker which halted trading on the New York Stock Exchange for 15 minutes.
US equity bears remain in control despite the Federal Reserve launching some bazooka’s and Trump pushing for a $1 trillion stimulus package. It is safe to say that the S&P 500 is bearish with the downside momentum dragging prices back below 2350.
Gold struggles to shine through market panic
It was the same old story with Gold as the precious metal fell over 2.5% despite risk aversion sweeping across financial markets.
Steep losses across the equity space have forced investors to dump assets for cash to cover margin calls. An appreciating Dollar also compounded to Gold’s woes with prices trading below $1500 as of writing. With Gold’s safe-haven status being overlooked amid the market chaos, further losses could be on the cards in the short term.
Commodity spotlight – WTI Oil
Oil is by far one of the biggest casualties from the novel coronavirus outbreak.
WTI Crude and Brent have both depreciated a staggering 60% since the start of 2020 and could extend losses as the pandemic darkens the outlook for fuel demand. To rub salt into the burning wound, the raging price war between Saudi Arabia and Russia is fuelling oversupply concerns. WTI Oil is trading around levels not seen in 17 years below $25 and may test $20 if nothing changes.
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