Stocks Pull Back after Bumper Start to the Week

Stock markets are paring recent gains on Thursday, with Wall Street eyeing a slightly softer open as Europe drops more than 1%.

The sell-off late last week left markets looking a little vulnerable but the Fed put a stop to that with its corporate bond purchases.

A big risk factor for the markets is Beijing. If the stock market has one major vulnerability right now it’s the dreaded second wave of the virus, which threatens to shut down economies once more. It’s all well and good central banks pumping the system full of cash, if the global economy grinds to a halt again, investors will get very nervous.

Until then, focus will remain on economies reopening around the world and central banks expanding their balance sheets at a phenomenal rate. Barring a damaging second wave, it’s difficult to envisage stock markets suddenly falling out of favour.

BoE adds to global stimulus

The Bank of England today continued to trend of pumping ever more cash to fight the crisis. As expected, the MPC voted to add another £100 billion to its quantitative easing program, with only one member dissenting. The upside was that they believe the economic outlook has improved since the May inflation report and that conditions have improved allowing them to conduct purchases at a slower rate, with the additional £100 billion seeing them through to the end of the year.

Oil edging back to $40

Oil prices are continuing to creep higher again after dipping a little last week. WTI is closing in on $40 again as economic indicators, particularly in the US, continue to look promising. The downside risks to oil prices remain, most notably new waves of COVID – as we’re already seeing – and producers ramping up production now that prices have returned to more acceptable levels. We may see oil face a lot more resistance to rallies than we’ve bcome accustomed to over the last couple of months.

Gold struggling yet again

Gold is coming off a little today as it continues to face challenges on approach to $1,750. The rebound in the dollar continues to hold it back, with the stronger US data for May contributing to that. The dollar is a major headwind for gold and it continues to come back into favour, whether the environment becomes more risk off or the US economy exceeds expectations. It may make gold’s trip higher a bit of a slog in the near term but longer-term factors continue to be supportive.

For a look at all of today’s economic events, check out our economic calendar.

Craig Erlam,Senior Currency Analyst at OANDA

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Open – The Wobble Continues

New Cases Trigger Second Wave Concerns

It seems a combination of a new spike in COVID cases in Beijing and disappointing Chinese data is weighing on sentiment at the start of the week. The numbers are still very low in the Chinese capital but the risks are high which may explain the apprehension we’re seeing in the markets this morning.

I’m sure there’s probably also a strong element of positions being trimmed back after a strong run for stock markets. Moments like this can often reflect where the market is as much as the newsflow and maybe investors are just feeling a little uneasy about the prospects of a second wave on a market that has pretty much already fully recovered.

The data from China overnight doesn’t help matters and suggests the recovery isn’t quite as strong as hoped but let’s face it, the numbers aren’t having a great impact and without the spike in new cases and markets being where they are, we’d have probably seen a similar response this time around.

With central bank still pumping enormous amount of cash into markets, I have no doubt there’ll be appetite whenever we see dips like this. Obviously a few failures may test the resilience of the rally but as we’ve seen already, there’s a huge disconnect between markets and the economic reality, there’s little reason to think that’s about to change.

Oil recovers earlier declines on COVID case spike

Oil prices are falling alongside stock markets this morning, off around one percent after recovering most of their earlier losses. Natually reports of spikes in new cases in the US, China and Japan aren’t helpful for crude prices. Trump has vowed not to shutdown the economy again but if the second wave is anything like the first – if/when it arrives – I’m not sure he’ll have much of a choice. Oil prices will remain very sensitive to evolving COVID situation, despite the best efforts of producers around the world to rebalance the market.

Gold slips as dollar firms

Gold is off again this morning, falling around 1% as it once again fails to generate any upside momentum near the $1,750 level. The dollar has firmed in recent sessions, despite slipping a little today which may be contributing to the yellow metal’s failings but given that we’re seeing risk assets slipping today, it’s a little disappointing. Obviously the greenback represents a significant barrier for gold but it is gradually softening and the environment beside that is undoubtedly supportive.

Bitcoin tests $9,000

Bitcoin slipped below $9,000 briefly but has pared earlier losses already. It’s currently back above this level but looking increasingly vulnerable, particularly at a time when we’re seeing a bit of a wobble, as far as risk is concerned. The key level remains $8,000, although there are still a few support levels  before then. Below $9,000, $8,800 looks interesting followed by $8,500.

For a look at all of today’s economic events, check out our economic calendar.

Craig Erlam,Senior Currency Analyst at OANDA

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Week Ahead – Market Recovery Under Threat?

The New Normal

This could be a sign of the fragility that remains in the markets but then, the NASDAQ hit new record highs in each of the prior four days and breached 10,000 for the first time ever. This comes before the end of what could be the worst quarter in a century for the economy. Incredible.

Speculation around new waves of coronavirus cases is going nowhere any time soon, as countries look to reopen their economies and save businesses and jobs. But next week also brings a plethora of interest rate decisions as well which means more rate cuts and more asset purchases. In other words, more fuel for the fire. The disconnect between the markets and the global economy isn’t going to improve any time soon.

Key Economic Releases and Events

Monday 15th June

Time (UK) Country Indicator Name Period
00:01 United Kingdom House Price Rightmove MM May
03:00 China (Mainland) Urban Investment (YTD)YY May
03:00 China (Mainland) Industrial Output YY May
03:00 China (Mainland) Retail Sales YY May
03:30 Singapore Unemployment Rate Final SA Q1
Indonesia Trade Balance (Bln of $) May

Tuesday 16th June

07:00 United Kingdom Claimant Count Unem Chng May
07:00 United Kingdom ILO Unemployment Rate Apr
07:00 United Kingdom Employment Change Apr
07:00 United Kingdom Avg Wk Earnings 3M YY Apr
07:00 United Kingdom Avg Earnings (Ex-Bonus) Apr
09:30 Hong Kong Unemployment Rate May
10:00 Germany ZEW Economic Sentiment Jun
13:30 United States Retail Sales Ex-Autos MM May
13:30 United States Retail Sales MM May
13:30 United States Retail Ex Gas/Autos May
14:00 Russia Industrial Output May
14:15 United States Industrial Production MM May
14:15 United States Capacity Utilization SA May
14:15 United States Industrial Production YoY May
15:00 United States Business Inventories MM Apr
21:30 United States API weekly crude stocks 8 Jun, w/e
Japan JP BOJ Rate Decision 16 Jun

Wednesday 17th June

00:50 Japan Trade Balance Total Yen May
01:30 Singapore Non-Oil Exports MM May
01:30 Singapore Non-Oil Exports YY May
07:00 United Kingdom Core CPI YY May
07:00 United Kingdom CPI YY May
08:30 Sweden Unemployment Rate May
08:30 Sweden Total Employment May
10:00 Euro Zone Construction Output MM Apr
10:00 Euro Zone HICP Final MM May
10:00 Euro Zone HICP Final YY May
12:00 South Africa Retail Sales YY Mar
13:30 United States Building Permits: Number May
13:30 United States Housing Starts Number May
13:30 Canada CPI Inflation MM May
13:30 Canada CPI Inflation YY May
14:00 Russia GDP YY Quarterly Revised Q4
15:30 United States EIA Weekly Crude Stocks 12 Jun, w/e
23:45 New Zealand GDP Prod Based QQ, SA Q1
23:45 New Zealand GDP Prod Based YY, SA Q1
23:45 New Zealand GDP Prod Based, Ann Avg Q1
23:45 New Zealand GDP Exp Based QQ, SA Q1

Thursday 18th June

02:30 Australia Employment May
02:30 Australia Full Time Employment May
02:30 Australia Participation Rate May
02:30 Australia Unemployment Rate May
08:30 Switzerland SNB Policy Rate Q2
09:00 Norway Key Policy Rate 18 Jun
12:00 United Kingdom BOE Bank Rate Jun
12:00 United Kingdom Asset Purchase Prog Jun
12:00 United Kingdom GB BOE QE Gilts Jun
12:00 United Kingdom GB BOE QE Corp Jun
12:00 United Kingdom BOE MPC Vote Hike Jun
12:00 United Kingdom BOE MPC Vote Unchanged Jun
12:00 United Kingdom BOE MPC Vote Cut Jun
13:30 United States Initial Jobless Claims 8 Jun, w/e
13:30 United States Jobless Claims 4-Wk Avg 8 Jun, w/e
13:30 United States Continued Jobless Claims 1 Jun, w/e
13:30 United States Philly Fed Business Indx Jun
14:00 Russia Cbank Wkly Reserves 8 Jun, w/e
15:00 United States Leading Index Chg MM May
Indonesia 7-Day Reverse Repo Jun
Indonesia Deposit Facility Rate Jun
Indonesia Lending Facility Rate Jun

Friday 19th June

00:30 Japan CPI, Core Nationwide YY May
00:30 Japan CPI, Overall Nationwide May
07:00 United Kingdom Retail Sales MM May
07:00 United Kingdom Retail Sales Ex-Fuel MM May
07:00 United Kingdom Retail Sales YY May
07:00 United Kingdom Retail Sales Ex-Fuel YY May
11:30 Russia Central bank key rate Jun
13:30 Canada Retail Sales MM Apr
13:30 Canada Retail Sales Ex-Autos MM Apr
Russia GDP YY Monthly May
Russia Retail Sales YY May
Russia Unemployment Rate May
Russia Real Wages YY Apr

Country

US

It seems a second wave of the coronavirus is hitting the US and could very well derail a lot of the reopening momentum that was taking place.  As states reopen and Americans return to pre-pandemic behavior, it is expected that a rise in new coronavirus cases would occur.

The White House is convinced they have yet to see any relationship between reopening and increased cases.  If hospitalizations continue to increase, you could see many individuals decide to remain a part of the stay-at-home economy.  If the virus spread intensifies, restrictions will be tightened and that will put a damper on the economic recovery prospects.

On Tuesday, Fed Chair Powell will follow his downbeat FOMC presser with his semi-annual monetary policy report to the Senate Banking Committee.  With little time between events, it is unlikely for Powell to deviate from Wednesday’s rate decision.  Traders will also pay close attention to the release of US retail sales, which is expected to show a rebound from the record low seen in April.

US Politics

Economic jitters and virus concerns will likely push the Trump administration into supporting a second round of stimulus payments for Americans.  Coronavirus relief talks were not supposed to happen until late July, but that should change given the recent jump in cases throughout the country.

On Friday, President Trump returns to the campaign trail in Oklahoma, his first live rally since March.

Democrats are eagerly awaiting former-VP Biden’s decision on his running mate.  Prior to COVID-19, the Democratic National Convention was originally scheduled in July, meaning we should have found out his decision by June.  Since the convention was delayed till August 17th, he will have more time to evaluate his candidates.  Biden will turn 78 a few weeks after the election, so his VP selection will be critical for many voters.

UK

The UK experienced its sharpest contraction on record in April, the first full month of the lockdown. The economy contracted by 20.4% at the start of the second quarter which is expected to be the worst month of the three.

Next week the Bank of England is expected to increase its bond buying in response to the pandemic, with £100-200 billion added to its quantitative easing program. This comes as government borrowing spikes to fund the crisis which would have otherwise risked pushing up borrowing costs.

Brexit

High level talks between Boris Johnson and Ursula Von Der Leyen are expected to take place next week, possibly as early as Monday, as the two sides look to reconcile the significant differences ahead of the 31 December transition expiry. As it stands, no deal is the default and the UK is expected to formally rule out an extension once again. We’ve seen this all before though and compromise tends to come late in the day. Still, business could very much do without this in a pandemic year.

Russia

The Central Bank of Russia is expected to cut interest rates by 50-100 basis points when it meets next week, from 5.5% where it currently stands. Like many others, the economy has been ravaged by the coronavirus crisis and contracted 12% in April, and May is not expected to be any better.

Switzerland

The SNB is not expected to cut interest rates next week, with the main policy rate remaining at -0.75%. The central bank is active in FX markets, with its holdings of foreign currencies recently rising above 800 billion Swiss francs – greater than the output of its economy – as it seeks to stop the currency rising too far as a result of safe haven flows. The central bank hasn’t set an official floor for the EURCHF pair – hopefully learning lessons of the past – but 1.05 is believed to represent the informal level.

Norway

The Norges Bank is not expected to cut interest rates next week, with the main policy rate currently sitting at 0%.

China

China Industrial Production (4.5%E) and Retail Sales (-2.0%E) on Monday. Poor number could see Asian markets weaken depending on Wall Street’s friday performance. Ongoing tensions with the US over HK, trade and Covid-19.

No other significant data this week.

Hong Kong

Protests have died down for now over the securities law. Possible resurgence this weekend. HSBC and Stan Chart under fire for backing China’s HK security law. No significant data this week.

India

Economy continues reopening but Covid-19 cases are spiking, markets negative. Standoff with China continues in the Himalayas but negotiations continue.

Australia

Australian stocks and Australian Dollar sold heavily on equity correction into the week’s end. Negative results on Friday for Wall Street should see that trend continue into the first part of the week. Australian markets are among most vulnerable to deep bull market correction. RBA minutes Tuesday. Will look for talk about negative interest rates.Potentially bullish for stocks. Unemployment Thursday (6.9% E) will drive intraday volatility. Otherwise what happens in the US will drive sentiment.

Japan

BOJ policy meeting Tuesday. Unchanged at -0.10% but looking out for more stimulus measures. Stocks positive. Tankan and Trade Balance Wednesday. Unlikely to impact markets. Markets will be led by Wall Street after sell-offs this week.

Market

Oil

Oil didn’t escape yesterday’s backlash, with crude falling more than 5% on apparent fears around rising case numbers. Again, we have to take this in the context of an asset class that has done rather well over the last couple of months. It’s been some rebound and I think some serious profit taking may have kicked in. It’s creeping higher again today but $40 may remain an upside barrier for WTI.

Gold

Gold has been range-bound for the last couple of months since it first tried to break $1,750 only to quickly run out of steam. It’s tried again a few times since, each as unsuccessful as the last, and it looks to be suffering the same fate again this time. It’s pushing a little higher again as it looks to capitalize on dollar weakness but we could see it run into difficulties once again, unless the greenback continues its journey south.

For a look at all of today’s economic events, check out our Economic Calendar.

Craig Erlam, Senior Currency Analyst at OANDA


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US/China Conflict – Gold, Oil and Bitcoin in Focus

The soft reopening so far appears to be going well and is leading to further easing measures, including the prospect of travel again before the summer is over which is coming as a huge relief to those in the industry that have been ravaged by the crisis.

The stock market recovery appeared to stall in May but it seems to have found some momentum once again, with the news of human vaccine trials naturally aiding the move. While the data we’re seeing so far is encouraging, there may be diminishing returns so the longer we go without a vaccine or cure, the worse the data could become. Thankfully, what we’re seeing in both of these cases gives us cause for optimism.

Tensions between the US and China are hotting up and Hong Kong is proving to be an interesting battle ground. The US is now believed to be pondering sanctions, as China prepares to vote on a controversial new national security law to be imposed on Hong Kong. As yet, the strained relationship between the US and China hasn’t hampered markets too much but that could quickly change.

Oil looking strong

Oil is slightly paring gains today but continues to make impressive gains more broadly. Naturally, reports of economies successfully easing restrictions is providing a significant boost to oil prices, with the reopening of borders in the coming weeks only further supporting demand and therefore prices.

While the reopening will be gradual and people will take time to emerge from the safe shelter of their homes, particularly when it comes to foreign travel, these are hugely positive moves for oil producers as prices close in on $40. It’s now a question of when they’ll turn on the taps again and how much they choose to or even how fast they’ll be able to.

Gold facing some big tests

Goldis edging lower again today and closing in on $1,700. The yellow metal seemed to lose all momentum not long after eventually breaking through $1,750 resistance. A break back below $1,700 would be troubling for gold, from a psychological perspective, but the $1,660-1,680 region is far more key. A break of this would spell trouble for gold.

Bitcoin fighting back but $8,000 looks vulnerable

Bitcoin found some support around $8,500 this morning and has reversed course to test $9,000, around where it is already starting to struggle. It’s not looking great for the cryptocurrency, with $8,000 being the next major level below. A break of this and it will be like the halving event never happened and all the gains that came its way during that high exposure period will have been lost. Nervy times.

For a look at all of today’s economic events, check out our Economic Calendar.

Craig Erlam, Senior Currency Analyst at OANDA

US Open – Full of Optimism

The week has got off to a decent start, with Europe up a couple of percent and Wall Street eyeing a similar open as lockdown easing measures provide cause for optimism.

In these uncertain times, I’m sure that optimism will be replaced with fear, which in turn will be replaced with promise and maybe even a sprinkling of exuberance, repeatedly over the coming months only for the cycle to start again. Ultimately, it all depends on the second wave, when it rears its ugly head and how bad it is. Not to mention how far the testing, vaccine and cure has come along in the interim. But this morning we’re optimistic, so that’s nice.

At times like this, you wonder what impact people’s general mood has on the markets. We all want to be safe but the ability to leave your house, maybe go to work, see friends and family (while abiding by the latest guidelines, of course) and even grab a coffee will naturally put people in a better mood after two months of lockdown. The fact that the sun is shining doesn’t do any harm either.

Obviously there’s the far more fundamental benefits of all of this. As businesses reopen, more people can return to work which means more companies may survive and people’s jobs be saved. We’re in the midst of a severe recession, there’s little we can do about that but the more life returns to normal, the less severe it will be. From a markets perspective, this is the second most important thing behind avoiding a second wave that sets us back a month.

No repeat of last month, it seems, for June WTI contract

If there’s going to be a repeat of last month’s antics in the oil market, it’s going to come as an even greater shock this time around. We’ve gone full 180 and rather than plunging to new depths, the rally is only gaining momentum, with the June contract up almost 10% and above $32 a barrel.

The supply cuts of the last month combined with gradual reopening of various countries around the world has put a significant dent in the supply/demand imbalance and alleviated capacity concerns that led to last months panic.

Gold springs back to life above $1,750

Gold has sprung back to life in recent sessions and taken the previous highs with relative ease. Now above $1,760, it’s looking very bullish indeed. There seems to be widespread agreement that the fundamental factors are supportive of gold prices, with the dollar the only major headwind.

But it’s inflation that we all appear destined to be talking about for the foreseeable. It makes sense, unprecedented stimulus, higher costs of doing business and deglobalisation are all inflationary, at least in theory. An inflaiton hedge is one of the core arguments in favour of gold and will likely be a key talking point in the months ahead.

A lot of pressure on $10,000

Bitcoin survived another run at $10,000 last week and has already been on the defensive again today. This is another key battleground and one that looks to currently favour the bulls. That momentum could fade with a break of $9,000 but at the time of writing, it’s looking less likely.

For a look at all of today’s economic events, check out our economic calendar.

Craig Erlam, Senior Currency Analyst at OANDA

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Open – Waking From a Stimulus Induced Dream – Oil, Gold and BTC in Focus

The Addiction Needs Feeding

Federal Reserve Chairman, Jerome Powell’s, comments were hardly comforting on Wednesday. A bleak assessment of the outlook combined with demands for more fiscal stimulus – at a time when Congress looks deeply divided on the issue – and a rejection of negative rates wasn’t exactly what investors wanted to hear right now.

Of course, there’s already unprecedented amounts of stimulus flowing around the financial system in a bid to avert a global depression but we are already in a severe recession. Any hope of a V shaped recovery is long gone and we’re in full damage limitation mode. Perhaps the reality is finally setting in, although who would be surprised to see equities marching higher again tomorrow?

It’s long been said that markets are hooked on stimulus, only more of the drug can sustain them. If that was true before then it’s certainly looking the case now and even the staggering efforts we’ve seen in recent months may not be enough. Only more will do.

No sign of nerves ahead of June expiry

Oil prices are on the rise again this morning following a mixed day on Wednesday. A surprise drawdown in inventories was quickly offset by Powell’s comments but they didn’t hold oil back for long. Up around 5% already today as it continues to slowly grind higher. There’s no sign of nervousness going into Tuesday’s June expiry, although it’s worth noting that the carnage only started a day before last month. Either traders have short memories or we’re going to avoid a repeat of last month. I wouldn’t bet against either.

Gold testing range

Gold saw plenty of activity on Wednesday around Powell’s appearance and even managed to cling onto some of those gains despite his insistence that negative rates is not something they’re considering. I often get confused as to why markets get so hung up on specific policy moves when there’s so many other tools available that are far more effective. Still, it’s a relief to see the yellow metal moving again, a break above last week’s peak around $1,722 could be very encouraging for gold bulls.

Bitcoin threatening bullish $10,000 breakout

Bitcoin has found a new lease of life and is pushing $10,000 again as it looks to capitalise on the halving hype and take it back into five figure territory and keep it in the headlines. It’s run into resistance once again this morning but I don’t think the fight will end there. A break of $10,000 would be very bullish for the cryptocurrency and we’ve all seen what that can lead to. The previous peak around $10,500 may provide some resistance above but the next real test will be $11,000, although I wouldn’t be confident of that holding for very long.

For a look at all of today’s economic events, check out our economic calendar.

This article was written by Craig Erlam Senior Currency Analyst at OANDA.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Open – Markets, UK GDP, Oil, Gold, Bitcoin

Mixed Feelings on Lockdown Easing

The stock market rebound is running on fumes, it seems, as investors come to terms with the reality of what easing lockdown measures actually means.

We’ve all heard of the dreaded second wave for some time. It’s why politicians everywhere have been repeatedly stressing the importance of patience, in regards to abiding by and easing lockdown measures. I’m just not sure people really expected the risk to appear so soon, before many countries had started to emerge from the first lockdown.

It’s worth stressing that it’s still very early days and new cases that are emerging are just an expected increase that comes from such action, rather than a spike that warrants further restrictions. Either way, it certainly appears to have taken its toll on stock markets. At a time when so many are wondering why they’re so disconnected from the reality of severe recessions and huge uncertainty, perhaps that’s not such a bad thing.

UK GDP a reminder of the cost of lockdown

The UK is in the process of easing restrictions this week, with new rules around exercise, and leisure coming into force today, a move that has been met with mixed feelings unsurprisingly. The odds of broad agreement in these unprecedented time are slim to none. The timing of the GDP data this morning is therefore a timely reminder of the damage the lockdown is having and it was only in place for the final week of March.

And already the stories are starting to emerge regarding how the government plans to pay for all of this economic support, estimated to be £300 billion this year, with reports of tax hikes, freezes to pay and more. The end of austerity didn’t last very long.

Hesitancy potentially creeping in ahead of WTI expiry

Oil prices are a little flat today. Less than a week to go until the June contract expiry and perhaps it’s making traders a little nervous and more hesitate about joining the great rebound. A repeat of last month looks unlikely at this point but then, did it this time a month ago? It will be interesting to see how this unfolds.

Nothing new to report on gold

I’m tempted to copy and paste my gold comments from a day or two ago as there’s very little different to report. Gold is currenly trading slightly above $1,700 rather than slightly below which is progress, I guess. Nothing has fundamentally changed though and consolidation is still clear for all to see. Perhaps given the tight ranges, a breakout is almost upon us but maybe that’s more a case of me wishing for it than anything else.

Bitcoin settled in middle of halving hype range

Bitcoin is trading in the middle of its halving hype range, sitting around $9,000 this morning. There isn’t too much to discuss on this at the moment. The lower end of this range arguably looks the more vulnerable but that’s not clear right now and it may simply settle into this $8,000-10,000 range for a while.

For a look at all of today’s economic events, check out our economic calendar.

This article was written by Craig Erlam Senior Currency Analyst at OANDA.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Open – Markets, BoE, Oil Rally, Gold, Bitcoin

Investors Growing in Confidence

Stock markets are back in positive territory on Thursday, growing in confidence throughout the European morning as investors continue to celebrate the reopening of economies around the world.

As governments prepare to gradually ease lockdown measures, assets that have been savaged by the crisis are starting to look attractive once again. There is still an enormous amount of uncertainty in the global economy right now, not least the potential for measures to be reinforced should the lifting of restrictions prompt another spike that threatens to overwhelm healthcare systems.

That’s not proving much of a deterrent though. Stocks are still trading at a heavy discount and now they have trilllions of extra dollars of stimulus behind them, like fuel on the fire. This was always likely to eventually make a rebound far more explosive than it should otherwise be. We’re going to hear a lot of “these markets make no sense” over the coming months as we plunge into recession and unemployment goes through the roof. This is why.

Obviously, it doesn’t help when tech stocks are generally among those to have done well out of the crisis. It can sometimes look like a one person team, with tech basically dragging the rest of the market up with it and there may be a case of this contributing to the gains we’re seeing.

BoE raises stimulus hopes and delivers nothing but dour forecasts

The Bank of England got everyone’s hopes up late last week when it moved its announcement from the usual midday slot to 7am. They last did that on budget day and announced a raft of complementary stimulus measures, aimed at supporting the economy through the crisis. So you can imagine the disappointment when they remained on hold this morning, ending a week of speculation about what they could possibly be preparing us for.

The pound remains a little higher on the day, having pared earlier gains. The lack of rumours and speculation around what they could be about to announce had already cast doubts over whether they’re going to do anything at all but when it was actually announced, you could still sense the disappointment. Instead we got a forecast for the worst annual contraction in more than three centuries. No silver lining on this occasion.

A repeat performance of last month looking less and less likely for oil

Oil prices are on the rise again on Thursday, continuing their relentless rally and casting huge doubts over a repeat of the WTI May contract expiry fiasco. I mean, these are extraordinary times and facilities are still near capacity so I certainly wouldn’t write it off but production cuts and soft reopenings all over the place are having the desired effects. Inventory data has done little to deter, with EIA reporting an increase of only 4.6 million last week, continuing the downtrend. The market is gradually moving towards balance but its far from there yet and we shouldn’t count on demand too much.

Gold held back by dollar gains

A continuing rise in the dollar is putting pressure on gold prices, sending them lower on Wednesday. They’ve recovered a little today but should the greenback gather momentum, gold will likely remain under pressure. Still, for now it remains in a tightening consolidation period. A breakout may deliver another surge in activity, but when that will be isn’t clear. Momentum was with the bulls prior to this but these type of patterns can be quite unpredictable; the dollar will likely be the key factor.

Bitcoin losing momentum into halving day

Bitcoin is edging higher again today as it closes in on $10,000. It’s dropped a little momentum in recent days which may case doubt over its potential to break above here prior to the halving. A failure to do so may take the wind out of its sails and see it pull back. A break above though could take the rally beyond the halving day though and put it back in the headlines and we’ve all seen what impact that can have.

Economic Calendar

The article was written by Craig Erlam, Senior Currency Analyst at OANDA


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

FTSE 100 – Correction May not be Over Just Yet

Longer-term still looking promising

The charts were starting to look quite promising. We had a clear uptrend and price broke back above the 200/233 period simple moving average band on the 4-hour chart.

UK100 (FTSE 100) 4-Hour Chart

 OANDA fxTrade Advanced Charting Platform

Then we ran into our first obstacle on the daily chart , the 55-day SMA , which is when the profit taking kicked in. This took us back below the 55/89 SMA band on the 4-hour chart where we’re now testing the 200/233 band.

So far, the 38.2 fib is holding within the first band but that doesn’t mean much yet. A break back through 5,800 would add some promise, especially if combined with a significant close above the 55/89 SMA band (4 hour chart). Obviously, that doesn’t necessarily been it’s correction over but it’s a major hurdle overcome.

UK100 (FTSE 100) Daily Chart

Given the initial trend line break , failure of 55-SMA (daily) and immediate resistance around the 55/89 SMA (4hour) band, I fear more pain may be in store for the FTSE .

This still looks like more of a corrective move but maybe one that has a little more to run. The area around the 50 and 61.8 fibs may appeal more, should the 38.2 fib and 200/233 band fall.

The article was written by Craig Erlam, Senior Currency Analyst at OANDA


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Open – Risk, Earnings, Oil, Gold, Bitcoin

The FTSE 100 took a hammering on Friday while many of the bourses were closed which is why it’s not coming under such heavy fire today. There’s some catch-up going on across much of the continent in the aftermath of Trump’s comments on potential Chinese tariffs. The last thing we need right now is a resumption of the trade war.

Earnings ended last week on a sour note, with Amazon and Apple adding a bit of gloom to a season that has, to that point, been given a bit of a free pass. Perhaps this is more of a timing issue than an earnings one but it appears to have contributed to the sea of red we’re now seeing. More earnings to come this week but we are past the peak.

Thankfully, the same appears to be true of the coronavirus itself. Boris Johnson emphasized this last week, even as the UK is on course to overtake Italy with the second-highest number of reported fatalities, behind the US. We should learn a lot more about the lockdown easing process over the coming weeks, although I imagine it’s going to be very flexible as we see what impact it has on the data and healthcare system.

Oil slips as risk appetite dwindle

Oil prices appear to be mirroring sentiment in the markets today, with WTI down 7% on the June contract. A little over two weeks until expiry, we’ll soon see just how at ease traders have become with storage capacity. US production is now around one million barrels a day off its peak but falling very gradually in the last month, only 100,000 barrels per week.

The same isn’t true of rig numbers, which have been plunging so I imagine this will catch up with the production figures and alleviate the storage pressures in time. Whether that will come in time for the June expiry I’m not sure. Should be a fascinating couple of weeks.

Is gold a safe haven again?

Gold has enjoyed a nice bump these last couple of trading sessions. It technically remains range-bound but the move has come alongside stock market declines. I’m not going to speculate just yet about whether its normal relationship with risk has restored, I’ve done that enough over the last couple of months only for it to revert. Whatever is giving it a boost today, only a break of $1,750 will be meaningful, although $1,740 – the most recent peak – will be interesting a could create some excitement.

Bitcoin needs hype to sustain move above $10,000

Bitcoin is holding above $8,500 after peaking around $9,500 last week. It’s often difficult to attribute the moves in bitcoin to anything in particular but the proximity to the halving event seems logical, from the perspective that it gives it exposure rather than anything more fundamental. You would think that anything significant would be priced in by now.

Whether the exposure can see it through $10,000 is one thing, whether it can sustain it is another. We’ve seen it before, the mere act of it rising fast creates the stories which generates the exposure. If that doesn’t happen, any rally may quickly fizzle out and we could find ourselves back at the early April levels.

Economic Calendar

The article was written by Craig Erlam, Senior Currency Analyst at OANDA


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US Open – Tariffs, Earnings, Oil, Gold, Bitcoin

What a Strange Week

It’s been a very strange week in all honest. We rallied early on ahead of some huge earnings results and central bank meetings, as investors swerved the kind of caution that usually accompanies such major announcements. We then got a legitimate boost from Gilead and the Remdesivir trial, along with decent corporate results from Microsoft and Facebook. And we’ve finished the week weighing up the prospect of US tariffs on China. Weird.

It doesn’t help when tech heavyweights Apple and Amazon leave investors scratching their heads. Prior to the results, Amazon’s stock was 13% above its pre-COVID peak, having suffered the plunge that everyone else did in late February/early March. That’s an impressive 52% gain from its March lows as the belief was that the company had done rather well out of the crisis. And then the company announces that any gain from sales will be wiped out by the cost of keeping workers healthy and processes running, leading to a potential operating loss of $1.5 billion in the second quarter.

The upside is that a number of the heavy hitters have now reported and the busiest week is behind us and we’ve come out of it unscathed. Who knows what lies ahead and next week is still busy on the earnings front. But this week was a huge potential banana skin and there’ll be some relief that it could have gone a lot worse. Assuming we survive today that is, with futures a couple of percent lower, I may be speaking too soon.

Oil pares gains as production cuts ramp up

Oil prices have staged an impressive rebound this week after a rocky start, as the USO – America’s largest oil ETF – opted to avoid another May contract scenario and shed its June holdings. This represented around 20% of its $3.6 billion portfolio so traders were naturally keen to get out the way and compress prices to very generous levels, if you’re a buyer. The price rebounded shortly after but still trades below $20.

The production cuts are finally kicking in with Saudi Arabia reportedly implementing agreed reductions ahead of schedule, the OPEC+ deal officially underway as of today, Norway announcing a reduction of 250,000 barrels per day and ConocoPhillips culling 265,000 this month, rising to 460,000 next. Others will likely follow, at which point we may see downside pressures ease on oil prices and near contracts. Prices are still extremely low though and the next two weeks will likely see extreme volatility return.

Can gold continue consolidation in this environment?

It’s been a strange week again for gold. It remains broadly aligned with risk assets but not necessarily reliably so at this point and even its relationship with the dollar has become a little sketchy. It seems after a period of turbo-charged volatility, the yellow metal has settled into a consolidation phase, with $1,660 providing the floor and $1,750 the ceiling. Quite a broad range, granted, but given the environment, something has to give. Either the world’s going to become a more predictable and relaxed environment, or this can’t last.

Bitcoin halving proving a bullish event for cryptos

The bitcoin halving event is nearing and it seems the extra publicity the crypto space is getting as a result is having the usual effect. Bitcoin dragged its feet through $7,500 resistance but once $8,000 fell it took off. The cryptocurrency fell short of $10,000 psychological resistance to trade just below $9,000 at the time of writing. The halving itself isn’t a bullish event – something that seems to have broad agreement which is strange to see, normally everything is bullish for some reason – but publicity often is so the coming weeks may generate interest and support cryptos. Whether it can be sustained after that I’m very sceptical.

The article was written by Craig Erlam, Senior Currency Analyst at OANDA


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.