GBP/USD Daily Forecast – Upcoming Coronavirus Aid Package Puts Additional Pressure On U.S. Dollar

Risk-On Mode In The Markets Helps British Currency

The British pound continues its rebound against the U.S. dollar and has already breached the 1.1800 level. The U.S. dollar is under pressure from the U.S. Federal Reserve’s unlimited quantitative easing and from the upcoming U.S. coronavirus aid package.

Early on Wednesday, the U.S. officials have told the press that an agreement on the huge economic stimulus bill has been reached. Massive aid for U.S. businesses and citizens boosts risk appetite and puts pressure on the U.S. dollar.

The exact details of the coronavirus aid package will be published later on Wednesday. It is expected to be worth as much as $2 trillion and contain aid to businesses and hospitals, as well as direct payments to U.S. families.

Wednesday will be a rather eventful day on the economic data front. Various measures of inflation, including Inflation Rate, Core Inflation Rate, PPI Output , Retail Price Index will be reported in Britain. In the U.S., traders will pay attention to Durable Goods Orders, which are expected to show a contraction of -0.8%.

Thursday will bring even more important economic data, as Bank of England will announce its rate decision. Analysts expect that the rate will stay unchanged at 0.1% as there’s almost no room for further cuts.

While the U.S. GDP Growth Rate would have traditionally been the most important data point for the day, Thursday’s Initial Jobless Claims will be in spotlight since they are expected to show a massive increase compared to the previous reading due to coronavirus containment measures.

Technical Analysis

gbp usd march 25 2020

GBP/USD breached the 1.1800 level and continues to move higher. The next major resistance for the pair is at 1.1930, near the high of the most significant rebound attempt after the major downside move in mid-March.

In case U.S. dollar weakness continues and GBP/USD manages to get past 1.1930, the 20 EMA at 1.2240 may serve as the ultimate goal for the current rebound. However, the situation is very fluid right now so traders will have to pay close attention to the sustainability of the current upside move.

On the support side, the previous resistance level at 1.1700 has become the new support which has already been tested by GBP/USD several times before it moved above 1.1800.

USD/CAD Daily Forecast -The Canadian Dollar Fails To Rebound

Weak Oil Continues To Put Pressure On The Canadian Dollar

USD/CAD continues its attempts to settle above 1.4500 and maintain the upside trend despite the broad-based weakness in the U.S. dollar. The U.S Dollar Index has left the 103 – 104 area and is currently located near the 102 level due to risk-on sentiment in most markets.

The expectations of a massive U.S. coronavirus aid package together with the previously announced unlimited quantitative easing ensure the flow of funds into riskier assets and lead to U.S. dollar weakness.

However, the Canadian dollar is heavily dependent on oil price dynamics, and oil fails to gain ground due to concerns about future oil demand.

Today, the markets had a chance to evaluate U.S. Flash PMI and New Home Sales numbers. The Manufacturing PMI Flash came at 49.2, just below the previous reading at 50.7.

However, the Services PMI Flash was down to 39.1 from the previous reading of 49.4, highlighting the blow to the services sector dealt by virus containment measures.

New Home Sales were also not inspiring, showing a 4.4% contraction. In general, investors and traders will have to get used to disappointing data since it is unlikely that any improvements will be reported in the following few weeks.

Technical Analysis

usd cad march 24 2020

USD/CAD continues to receive strong support at the 1.4330 level. Currently, the pair has settled in the 1.4330 – 1.4530 range despite the broad-based weakness of the U.S. dollar.

In this situation, traders will have to watch oil prices closely since a major move in any direction could quickly force USD/CAD to leave the current range.

In case USD/CAD breaks to the upside, the next resistance is still located in the 1.4610 – 1.4670 area. This is a very important level for the pair since it was previously visited back at the beginning of 2016 when oil prices were below $30 per barrel due to supply shock from the American shale oil.

At that time, the upside move was followed by a major correction which ultimately took USD/CAD to 1.2500. Thus, traders should expect increased resistance in this area since some players will surely initiate positions to bet on a simular move in 2020.

On the support side, the breach of the 1.4330 level will likely take the pair closer to the next support level at 1.4150.

S&P 500 Price Forecast – Stock Markets Have Short-term Relief Rally

The stock market has rallied significantly during the trading session on Tuesday, reaching towards the 2375 level but at the same time one should think about the 2400 level as a potential resistance barrier as it has been over the last couple of days. At this point, the market has a lot of noise just above so at this point it makes more sense the sellers would step in. The market could pull back towards the 2200 level at the first sign of bad news, because quite frankly the market still turn around this quickly. This is especially true considering that the US economy is grinding to a halt but eventually we will start to look through all of the headlines and aim for higher levels.

S&P 500 Video 25.03.20

That being said, I don’t think we are there yet, and I see plenty of opportunities for sellers to get involved. Even on a break above 2400 I am still skeptical and believe that the 2500 level would probably be targeted. All things being equal, we are probably going to have to retest the bottom as per usual on these types of bear markets before seeing buyers come around and change the trend. We need to see coronavirus levels drop in the United States, and of course the economic numbers turn around. I do think that most of the worst has been priced in, but to say that everything is going to turn around and instead is clearly being overly optimistic.

Oil Fails To Gain Ground Despite Broad-Based Optimism

Market Action Proves That Oil Demand Outlook Is More Important Than Monetary Stimulus

Despite the widespread optimism in the markets today, oil failed to sustain upside, and this fact looks like a material bearish sign for black gold. Previously, I noted that the situation with real demand will serve as a more important catalyst for oil prices than the financial measures to provide support to the markets.

While the U.S. stock market cheers the upcoming $2 trillion coronavirus aid package and gold rallies thanks to the unlimited quantitative easing program that was recently announced by the U.S. Federal Reserve, demand worries continue to put pressure on oil prices.

Airlines have recently doubled their previous loss estimates and now expect that the industry will lose more than $250 billion in revenue in 2020. The new figure reflects the hit to travel demand dealt by coronavirus containment measures.

The previous estimate of a $113 billion revenue hit now looks miniscule, while it was delivered just a few weeks ago at the beginning of March. The rapid change in airline revenue hit estimates highlights the speed of changes brought by the virus.

Just like the outlook for airlines, a major oil consumer, got much worse in the past weeks, so did the outlook for oil demand in general. As coronavirus cases around the world continue to increase and countries impose new restrictions, the outlook for oil demand in April can get even worse than before.

U.S. Coronavirus Situation In Spotlight

U.S. President Donald Trump hinted that he wants to reopen the U.S. economy and lift restrictions as soon as possible. However, coronavirus containment measures will depend on the actual medical data.

At this point, the general market optimism is fully centered around monetary stimulus since the actual virus data is not inspiring at all. The World Health Organization stated that the U.S. could become the next epicenter of the coronavirus.

Should this happen, investors and traders should expect more virus containment measures which will deal an additional blow to oil demand in the world’s biggest economy.

In my opinion, oil will not be able to show sustainable upside without any signs of stabilization on the virus front. As the potential duration of virus containment measures is unknown, oil traders will have to navigate an environment full of uncertainty.

 

Silver Price Daily Forecast – Major Rally In Gold Supports Silver

Weaker Dollar And Unlimited QE Help Silver Get Through The $13.00 Resistance

Silver breached the $13.00 resistance and quickly rose above the $14.00 level as optimism returned to the markets due to Fed’s unlimited QE and U.S. President Trump’s desire to reopen the economy as soon as possible.

Gold had an especially spectacular rally and almost breached the $1700 level. As I previously noted, silver needed upside in gold to have a chance for a material upside move.

The U.S. Dollar Index also helped as it is corrected from the 104 area closer to 102, highlighting the U.S. dollar weakness against a broad basket of currencies. Dollar weakness helps silver as the metal becomes more affordable for buyers who have other currencies.

The optimism is widespread in many asset classes today, and silver benefits from positive investor mood. That said, investors and traders in silver will have to monitor the coronavirus situation closely since the market mood can quickly change if new data points to new restrictions in the future.

Generally, the current financial situation is positive for silver since the biggest central banks have set their rates close to zero, while some rates are in the negative territory. This environment is positive for precious metals that don’t pay interest since the opportunity cost of investing in them decreases.

Technical Analysis

silver march 24 2020

Now that silver has breached both the $13.00 and the $14.00 resistance levels, it will have to hold above $14.00 in order to continue the current upside move without a meaningful pullback.

In the other case, silver will likely have to settle in the $13.00 – $14.00 range, and a test of the $13.00 support will be possible.

In case the former resistance at $14.00 becomes the new support level, silver will have a material chance to get to the next resistance at 50 EMA near $15.00. I’d note that gold prices have already returned to their pre-crisis levels, while silver has yet to get anywhere close to $17.00.

In this light, the catch-up potential in silver remains intact, but investors and traders should note that silver has been receiving much less support than gold in recent times, so it’s hard to expect that silver will simply copy gold’s moves with a time lag.

Corona Virus Dropping more than Bodies – Interest Rates under a Global Pandemic

Low Interests Rates Are Propping Up The Global Economy

With central bankers cutting their prime interest rates to 0.0% or near 0.0%, investors are right to worry. The main concern is that the economic outlook is getting worse and the central banks may not be able to do anything about it.

The problem is that the major world powers already had low-interest rates. The U.S., the EU, Japan, the UK, and Australia are only the tip of the iceberg, low-interest rates were a common theme among most of the world’s central banks.

The central banks have been holding their key rates at or near historic lows for the last decade in an effort to spur global recovery. The reason is simple, the global economy took a long time to get back on its feet after the 2008 Global Financial Crisis and the footing was shaky.

The U.S. led the charge when it came to normalizing interest rates. After holding rates steady at 0%-to-0.25% for eight years the FOMC began hiking rates in 2015. After 9 incremental 0.25% adjustments, the rate topped out at 2.5%.

Since then, the FOMC made three “mid-cycle” adjustments in response to the trade war that put the benchmark at 1.75%. To put that in perspective, the high rate leading into the 2008 financial crisis was 5.25%. Since then, rates haven’t recovered half that ground leaving the FOMC without much ammo to fight future battles.

Other central banks were in the same boat or worse. The Bank of England was one of the last to cut rates to zero following the 2008 financial crisis, holding out until 2016, but in the end, did so. Since then, due to signs of economic recovery, they too have been hiking rates. The BoE’s top rate hit 0.75% in 2018 and was held at that rate into 2019. The Bank of Japan and European Central Bank were the worst off. Both of these institutions have held their rates at negative levels for several years.

The Best Medicine For Coronavirus? Fiscal Stimulus

The biggest risk to the world from the coronavirus is its impact on the economy. The virus is a threat to health, I’m not discounting its danger, but it’s little more than a cold in most cases. The problem is that everyone is going to get sick, sooner or later, and world governments are trying to slow the spread. This means disruptions to activity, hiccups in supply chains, business closures, loss of revenue, and a growing potential for a deep, worldwide financial recession.

The central bankers’ best means of fighting economic weakness is with monetary stimulus. Monetary stimulus means, in virtually all cases, lower interest rates. Lower interest rates make it easier for businesses to borrow money they need to get through periods of crisis. The trouble now is that the only central banks with ammo to fire used it up in a preemptive attack.

The FOMC made two emergency cuts, the BoE, Bank of Korea, Reserve Bank of Australia, and others at least one putting the world’s benchmark lending rates at 0%. If the economic fallout from the virus worsens there is little left for the central banks to do.

These Sectors Are Hurt The Worst

While all S&P 500 sectors are feeling pain from the coronavirus, there are several taking the direct force of the blow. The worst sectors are travel, leisure, and hospitality. The spreading virus has shut down travel and recreation on a global scale. The flights that are still allowed are virtually empty because no one wants to put themselves at risk. Likewise, casinos, resorts, and amusement parks are shutting down to prevent large crowds from gathering.

Most businesses have yet to quantify the amount of damages they will incur because the virus outcome is still an unknown quantity. Travel and leisure may be shut down for a month or they may be shut down for the rest of the year, we just don’t know and the potential for spillover into other sectors is huge. That said, a few companies have issued guidance that helps put the potential for loss in perspective.

Apple was the first major company to issue a guidance revision. The consumer tech giant is heavily dependent on China for its supply chain and said the epidemic would impact revenue as much as 10%, and that was before it spread globally. Since then, the company has had to close all stores outside of China which is another big blow to Q1 revenue.

Airliner United Airlines has come out with its own dire prediction. United Airlines executives see March revenue falling and that is just the beginning. Because of an expected downtick in traffic, they are cutting capacity by 50% for the next two months. They expect, assuming there is no flying ban, for capacity cuts to linger into the summer months. Basically, the economic impact will be severe and could last four to six months if not longer.

The Economic Impact Could Be Huge

With the world preparing to shut-down in an effort to stop the spread of the virus it is certain activity is slowing. The question is how much? Some industries are hurting, and badly, but others are not.

While shoppers shun public places, avoid large gatherings, and cancel plans for travel they are gearing up for an extended stay at home. This means increased spending on staples and health items that have retailers scrambling to fill shelves. Kroger and Amazon have both announced hiring plans to meet the demand and they are not the only ones.

Bloomberg did a study on the potential impact of the virus using four models. The worst-case scenario has a total impact on global economies at $2.7 trillion or roughly the annual output of the United Kingdom. This scenario is when the virus causes more than just localized disruptions, a point the world is on the verge of crossing.

Some sources estimate the impact has already caused world GDP to contract although the data is limited. The news we get from China is the most current there is and it isn’t promising. The PMI figures show a severe contraction in manufacturing and services activity that is scary if it becomes the global norm. GDP estimates vary widely but include the chance of 0% growth for China in the 1st quarter.

Contrary to China, data from the U.S. shows the economy not only expanding but accelerating in the first two months of the year. The Atlanta Fed’s GDPNow Tool is tracking at 2.9% for the first quarter and only fell 0.10% since peaking in late February. It is clear the U.S. economy was on solid footing before the virus, so the shock might not be as bad as feared for China. If the economic stimulus provided by the world’s central banks can sustain consumer spending the economy should rebound quickly.

The risk for most countries and the U.S. is not immune, it is not acting quickly enough. Delayed response or one not coordinated on a national scale will test the healthcare system and economic resilience of any nation. Prevention and slowing the spread is the key to ending the epidemic and paving the way for an economic rebound.

Low Rates Won’t Make Much Difference By Themselves

Lower interest rates won’t make much difference by themselves. Because most economic activity is driven by consumption and the consumers are home hiding from the virus, it’s them, the consumers, that need to be stimulated.

Low-interest rates will make it easier to borrow, many homeowners will get lower mortgage payments with a refi, but the positive impact will be small and long in coming. Low rates are good, they will help when the economy starts to rebound, but there are other fiscal weapons lawmakers can use with quicker results.

You can see proof of this in the charts. The FOMC lowered rates not once but twice and dramatically both times and was unable to stop the equity market from selling off. Even a $1 trillion spending package from Congress wasn’t enough to curb the selling.

How The Market Should Handle This Outbreak And Prepare For Future Outbreaks

This outbreak is the worst we’ve seen that I can remember but even so, we will get through it and with lessons learned. The first is that action needs to be taken quicker. No matter how innocuous a new sickness may seem it can’t be stopped after it’s let loose on the world.

Travel restrictions may have seemed like an overreaction two months ago but look where we are now. Cruise ships can’t operate, travel is severely curtailed, schools are closed, and I write this article with a kitchen stocked for a month-long stay at home.

Investors should prepare for future outbreaks like this by hoarding cash. Stocks are trading at their cheapest levels in over a decade and ripe for the taking but you can’t buy any if you don’t have cash.

Eventually, the virus will pass and the economy will get back on its feet. When that happens all these cheap stocks will become valuable again and make millionaires out of anyone brave enough to buy.

U.S. Stocks Set To Open Sharply Higher On Renewed Optimism

On Second Thought, Markets Embrace Unlimited QE

The U.S. stocks were down yesterday despite the Fed’s promise to pump as much money into the financial system as will be deemed necessary. However, the market is making a U-turn today, and S&P 500 futures point to a higher open due to expectations of monetary stimulus.

S&P 500 futures even hit the 5% upside limit at one point, highlighting the nervous nature of today’s markets which are ready to move up and down on the same catalyst.

Adding to optimism, U.S. President Donald Trump hinted that he will seriously consider lifting coronavirus-related restrictions in the near term as the U.S. “wasn’t built to be shut down”.

Many asset classes are in rally mode due to a combination of Fed’s unlimited quantitative easing and hopes that the lockdown could soon end. Gold has the most notable rally as it has almost breached the $1700 level. Just several days ago, gold traded near $1450 per ounce.

WHO States That U.S. Has The Potential To Become A Coronavirus Epicentre

Meanwhile, the World Health Organization is not that optimistic as the U.S. markets. WHO stated that the U.S. had a very large outbreak that was increasing in intensity.

The new numbers have not been released yet, but the U.S. already has more than 46,000 cases according to data from Johns Hopkins University. Fresh data from Spain indicated that the number of coronavirus cases has jumpted from 33,089 cases on Monday to 39,673 cases on Tuesday, and it’s hard to believe that the U.S. will have a smaller increase given the pace of contagion in recent days.

In this light, it remains to be seen whether actual medical data will allow the U.S. President Donald Trump to reopen businesses in the near future even if the economic damage is huge.

Gold Miners In Spotlight

The recent major upside move in gold will lead to investor interest in gold miners. It’s important to note that gold miners operate in a real world, and many of them are facing shutdowns due to coronavirus containment measures in various parts of the world.

However, some interest in bigger, diversified players like Barrick Gold, Newmont Mining, Agnico Eagle Mines, AngloGold Ashanti, Kinross Gold is almost guaranteed.

Silver Surges Despite Death Cross Pattern

The move came after the US Federal Reserve effectively pledged to do whatever it takes to prop up the US economy. The unprecedented Fed action slowed down the scramble for cash that has been driven by panic and the liquidation of positions due to margin calls.

The historic new program from the Fed includes a commitment to unlimited bond purchases, billions in corporate loans backstopped and the extension of credit to small and medium-sized businesses.

The Fed stated: “The coronavirus pandemic is causing tremendous hardship across the United States and around the world” adding that “aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes to promote a swift recovery once the disruptions abate.”

The Fed news was not sufficient to lead to gains in US stock indices on Monday, but Asian and European markets are trading higher early on Tuesday.

According to data from Johns Hopkins University, at the time of this writing the total number of confirmed Coronavirus COVID-19 global cases has risen to 383,944 and 16,595 deaths.

The World Health Organization (WHO) has warned that the coronavirus disease pandemic is accelerating. At a press conference on Monday, WHO Director-General Tedros Adhanom Ghebreyesus said: “It took 67 days from the first reported case to reach 100,000 cases, 11 days for second 100,000 cases, and just four days for the third 100,000 cases.”

Curiously, a bearish death cross pattern (50 period MA crossing below the 200 period MA) has formed on the daily chart after silver bounced from the lows made on March 18th. Support lies at the prior low of 11.60, while the 38% Fibonacci retracement of the recent swing at 14.41 represents potential resistance above. Normally safe havens in times of crisis, both gold and silver sold off during the financial crisis of 2008, before entering multi-year uptrends.

Dan Blystone, Scandinavian Capital Markets

Disney+ European Debut Scant Consolation Amid Covid-19 Woes

Starting today, many millions who are already being cooped up at home, having their outdoor movements restricted by their respective governments in a bid to stem the coronavirus outbreak, will get to enjoy Disney+ and the plethora of timeless classics and blockbusters offered on the streaming platform.

It’s estimated that Europe will account for some 25 million Disney+ subscribers by 2025, adding to the platform’s existing 28 million customers located beyond the continent’s borders. The global goal stands at 90 million subscribers by 2024. Such projections promise a steady and lucrative revenue stream for the world’s largest entertainment company.

Yet, shareholders have refused to be enamored by such a rosy outlook in recent months.

Disney’s stocks have performed worse than the S&P 500 so far in March

Since its highest-ever closing price on November 26, 2019, Disney’s shares have plummeted 43.4 percent and is now trading at its lowest levels in six years. The stock’s 27.1 percent decline so far this month has outpaced the S&P 500’s 24.3 percent drop during the same period.

Covid-19: the scourge of the house of mouse

The pain points are obvious, and it’s all down to the coronavirus outbreak.

Disney’s theme parks have been shut, which gives up $20 million a day from admissions fees alone. The broader segment accounted for over a third of overall fiscal revenue and nearly half of profits in 2019.

Disney’s top and bottom lines are set to face even more pressure, given the delays to its movie releases, plugs pulled on film and TV production sets, and the foregone earnings on cancelled sporting events (which is severely stunting ESPN’s menu). These factors prompted S&P Global Ratings to recently cut its outlook on Disney’s credit rating to ‘negative’, taking into account that the latter still has to service almost $52 billion in debt.

Can new Disney CEO make shareholders dreams come true?

It will be interesting to see how Disney’s new CEO, Bob Chapek, whose appointment in February came as a shock to markets, handles the role amid turbulent times. Should the widely-anticipated global recession become a reality, Chapek will be kept busy for years trying to restore the company’s earnings prowess.

In the interim, at least shareholders in Europe can further console themselves by gorging on the Avengers, Star Wars, and even Home Alone franchises, all from within the confines of their homes, as they wait for the Covid-19 crisis to pass.

Written on 03/24/20 08:00 GMT by Han Tan, Market Analyst at FXTM

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Markets are Trying to Buy the Dips of Quarantine

On top of this, governments are increasing measures to support small businesses and large companies. These decisions lead to an increase in demand for the purchase of shares of strong companies, which, according to market participants, were undeservedly sold out during the market crash earlier this month.

The announcement of new liquidity support measures by the Fed and the impressive (almost 20% of GDP) stimulus package in Germany have renewed the interest of markets for purchases. Futures on US and European stock indices have been rising more than 4% today.

At the same time, the markets are moving in contrast to the economic news, which is showing a decline in business activity on PMI indices. These indices have become a kind of universal measure in recent months, as the same methodology is used for different countries, with most of them publishing in the course of today.

Already released data from Japan and France showed a sharper than expected decline in activity in the service sector. In France, the PMI for the services sector collapsed by 29, the lowest level in the history of this study with a large margin. Business activity in the country collapsed at its highest rate in 22 years of research, indirectly indicating a more than 3% decline in the coming quarters.

Germany’s composite index was also weaker than expected. In essence, the service sector index declined to 34.5 vs 43 expected, the composite index fell to 37.2 from 50.7 a month earlier, vs 41.5 expected.

Indicators for Italy have not been published, but they would have come out even worse than these.

A month earlier in China, we also witnessed higher economists’ expectations against real statistics. Such dispersion once again shows a substantial undervaluation of quarantine impact on the economy.

The markets are reacting as if the data is the matter of the past. And the best strategy, for now, is to try to buy at the peak of fears. But this can be a dangerous mistake.

Quarantine measures have increased dramatically in recent weeks, but they were not enough to contain the increasing number of new cases in Germany, Spain, France. Even more so in the United States. Over the past 24 hours, the number of new cases there grew by more than 10K, accounting for more than a quarter of all new cases. In other words, neither the pandemic situation, nor economy has reached a turning point.

With such background, the final business activity data in March and statistics in April may turn out to be even worse, risking turning the health care crisis into an economic one. The proactive steps of the Fed, ECB and many other central banks has so far helped to offset the risks of a full-fledged financial crisis. But this means that markets have passed the peak of volatility, but not the lowest point. After a short bounce, stocks and commodity assets may turn back to decline, without a real recovery in demand.

 by Alex Kuptsikevich, the FxPro senior market analyst. 

Exceptional Circumstances Demand Exceptional Action: Scope on Europe’s Covid-19 Crisis Response

Below is an interview with Giacomo Barisone, managing director in sovereign ratings at Scope Ratings.

Are European governments’ responses to the coronavirus crisis the right ones?

Governments in Europe have realised the gravity of the circumstances and are enacting two types of policies: i) containment measures to respond to and mitigate the public health crisis and ii) policies to reduce the economic impact of the crisis.

Tough containment measures are negative for near-term growth, but assuming that they achieve desired ends of slowing transmission – as they have in parts of the world like China and Taiwan – they support prospects of gradually “flattening the curve” of infection rates: that is, ensuring a slower rate of transmission and thus, lowering the strain on hospital capacity and fatalities.

Assuming the containment measures slow the coronavirus’ transmission in the coming months in the northern hemisphere, a focus by governments on alleviating the impact of the crisis on businesses and households is key.

In this context, action by national governments and the European Commission, including liquidity guarantees and targeted support to groups most likely to suffer from the effects of the pandemic – such as the self-employed and small businesses – are what is needed at this stage.

Banks are unlikely to extend loans to businesses that have now become riskier owing to limited cash flows. Tough containment and economic- and liquidity-support measures could abet a very gradual recovery, hopefully starting in H2 2020. However, risks of continued transmission of the virus and/or a new wave in the fall or winter could still have an impact in H2 2020.

What do you think of the ECB’s announcements so far including the ECB’s new emergency package?

The ECB delivered last week a well-designed package of emergency measures to counter the shock, including attractively priced liquidity to the banking system and additional asset purchases to ease significant market anxiety.

The new Pandemic Emergency Purchase Programme (PEPP) of EUR 750bn of new purchases of public- and private-sector securities extending to at least the end of 2020 implies cumulative new asset purchases of almost EUR 1trn when combined with the package announced earlier in March.

Importantly, the ECB is giving itself more room for manoeuvre by conducting securities purchases under this programme with greater flexibility with regards to time and across asset classes and jurisdictions, including a waiver that allows for the purchase of Greek securities.

In addition, the ECB Banking Supervision agreed to temporary capital and operational relief for euro area banks, which should mitigate pro-cyclical, unintended consequences.

This ECB decision also allows for consideration of public-sector issuer limit changes and de facto activation of Outright Monetary Transactions without conditionality via facilitation of the front-loading of purchases for certain countries. The action also underscores authorities’ commitments to avoid the Covid-19 economic shock deepening the existing financial crisis, which could, if left unchecked, exacerbate the overall economic dislocation caused by the pandemic.

What is the impact on Europe’s economic outlook?

We expect a strong downward revision to growth in H1 2020.

Prior to the outbreak of the COVID-19 crisis, we expected moderate euro area growth of just above 1% for 2020. Now, depending on the duration of the lockdowns, the economic impact will be severe. On average, in line with a recent ECB update, we assume for now a 1.5 to 2.0pp decline in growth for each month a country is in lockdown, which for the euro area implies deeply negative growth for 2020.

Will the containment, fiscal and monetary policy response be enough?

This is too soon to tell.

The key for overcoming this crisis is to slow the transmission of the virus until ultimately immunisation treatment is available for public use (hopefully by 2021). The earlier containment measures work, the sooner they can be relaxed in gradual phases, bringing businesses and households back towards normality. In this context, the national and European policy responses are now accelerating and in the right direction.

Will countries breach the European fiscal rules?

No. The Stability and Growth Pact allows for deviations from the 3% fiscal deficit rule under exceptional circumstances and the European Commission has indicated leniency in this regard at least for the year 2020.

Therefore, even if countries’ 2020 deficit figures break beyond 3%, which may be the case for Italy (BBB+/Stable), France (AA/Stable) and Spain (A-/Stable) among others, member states would still be compliant with budget rules as these have been suspended under a “general escape clause” for 2020.

Does this crisis put sovereign ratings for countries at risk?

Our focus in the current environment will be on assessing whether temporary and urgent fiscal measures enacted by governments to counter the public health emergency will have implications that persist over the medium-run as well.

At this stage, the prospect of one-off 2020 fiscal deficits closer to or above 3% of GDP in 2020 is not in and of itself a reason to downgrade a sovereign’s credit ratings. The size and potential longevity of the current simultaneous demand and supply shock induced by the crisis warrant a significant fiscal effort to mitigate the economic impact.

The pandemic is an external shock that will ultimately hit most countries of the world, albeit to varying degrees depending on the effectiveness of containment actions, hospital capacity, policy responses as well as economic structures and fiscal resilience.

COVID-19 is exacerbating risks especially for countries already experiencing low growth and/or those with elevated debt ratios, external vulnerabilities and/or financial system fragilities. Countries whose sovereign ratings might be more likely to be affected include China (A+/Negative), Japan (A+/Stable), Italy (BBB+/Stable) and Turkey (BB-/Negative).

Giacomo Barisone is Managing Director in Public Finance at Scope Ratings GmbH.

What a Surprise, There Are Actually Instruments Which Are Going Up: DAX, Gold and EUR/USD

Coronavirus has started showing signs of slowing down in Italy, which is giving everybody hope. On the other hand, we have new restrictions in the UK, which is still in the early stage of the epidemic. The FED tries to lift the markets again but the bazooka which they used yesterday was more like a rubber stick than a miracle weapon or maybe it is but it works with some kind of a delay. Yesterday, investors rather ignored the news from FED but Tuesday starts with optimism.

Let us show you the DAX, which is still fighting on the crucial long-term support of 8200 points and on this support, we are drawing an inverse head and shoulders pattern. We all know that this formation is a very powerful one but it gives a buy signal only after the breakout of the neckline. The thing is that the neckline is being challenged right now. A breakout can bring us optimism but the bounce and the drop will be another bearish factor and we already have quite a few of them.

Gold bounced from the crucial support level of 1450 USD/oz and yesterday broke its crucial resistance around 100 USD higher – on the 1550 USD/oz. After the breakout of that resistance, the way towards the new highs is pretty much opened and Gold is ready to shine again.

Long time no see for our old friend EURUSD. After the pair collapsed in the middle of March, now it has time for a correction. The correction is so far pretty flat but it’s shaped like an inverse head and shoulders formation, so it has potential. For the buy signal, buyers need to break the resistance slightly below the 1.08 level. If successful, the price can climb up as high as to the 38,2% Fibonacci around the 1.097 level.

GBP/USD Daily Forecast – British Pound Gains Ground On Broad U.S. Dollar Weakness

Unlimited QE And Massive Coronavirus Aid Package Put Pressure On The U.S. Dollar

Yesterday’s shocking move from the U.S. Federal Reserve, which announced an unlimited quantitative easing program, helped weaken the dollar and provided support for GBP/USD.

Meanwhile, the U.S. continues its efforts to pass the coronavirus aid package. Differences between the positions of Republicans and Democrats remain, but the markets hope that the consensus will be reached today.

I’d note that the projected size of the coronavirus aid package has grown from $1 trillion to $2 trillion. This is a massive amount of money and a bearish factor for the U.S. dollar.

Today, we’ll learn how the virus containment measures have impacted the British economy as Manufacturing PMI and Services PMI data is scheduled to be released. The U.S. will also have a data-heavy day. In addition to PMI, New Home Sales will be reported.

Analysts expect that all of the above-mentioned data will show contraction from previous numbers, and the only intrigue is how bad the actual situation is.

At this point, the unprecedented measures by the Fed and the upcoming massive coronavirus aid packaged have stopped the never-ending dollar upside against a broad basket of currencies.

The U.S. Dollar Index has tried to breach the 104 level several times but failed to move forward and has currently settled below 103. The U.S. Dollar Index has previously been at current levels back at the end of 2016 – 2017.

It topped at roughly the same levels and started a downside move that ultimately brought it below 90 at the beginning of 2018. The move higher than 104 happened back in 2000.

Technical Analysis

gbp usd march 24 2020

Yesterday, GBP/USD confirmed support below 1.1500. The pair has already made several attempts to settle below this level, and these attempts were met with increased buying activity, which is a bullish sign for GBP/USD.

The near-term resistance for GBP/USD is near 1.1700, while the next resistance level is located at 1.1800. While the pair is trying to bottom out, it has not yet confirmed that it is ready for a new upside trend following the rapid decline in mid-March.

Future trading sessions will heavily depend on whether the above-mentioned QE and coronavirus aid package will lead to additional weakness in the U.S. Dollar Index. If this happens, the test of 1.1800 will be coming soon.

The Fed Is Not The Problem. 

“If you put the federal government in charge of the Sahara Desert, in five years there would be a shortage of sand.” Milton Friedman

Markets

Investors were chapfallen by the massive Fed action that has not led to more of a market rebound, with equities struggling to bounce and the US dollar hardy worse for wear.

It certainly isn’t a problem of insufficient Fed action as this move trumpets in unlimited government spending financed by unlimited Fed purchases arriving faster than anyone could have imagined. The Fed unleashed it’s all in howitzer to fund an array of programs, including Fed backing for purchases of corporate bonds and direct loans to companies and promises that it will soon roll out a plan to get credit to small- and medium-sized businesses.

This deluge is as much liquidity support as markets could wish for as the Fed plans to add a $625 billion balance sheet this week. That equals a staggering annual pace of $32 trillion per year.

Sure, it’s a titanic task to amplify the historical significance of today and not necessarily in a good way.

The basic tenants of how a government influences the economic decision-making process in a capitalist society have been discarded as Asian investors awake to the most significant monetary experiment in the history of financial markets.

And the famous quote by Milton Friedman does resonate this morning, “If you put the federal government in charge of the Sahara Desert, in five years there would be a shortage of sand.”

Congress failure to launch is the problem.

However, Nancy Pelosi is reportedly open to a 2.5 trillion deal that is being hashed out between Schumer and Mnuchin.

Fortunately, we are close to a Presidential election, so it doesn’t seem likely that opposition from the Democrats will last for long.

And while congress dawdles, it also means that once a deal is signed, the market reaction will likely be a strong one, even if it will most probably take several attempts to arrive at the necessary size of at least several trillion dollars.

But the problem is not the Fed; the problem is politics.

Millions of workers are in the process of being laid off. Hence, as the days roll by without a political deal to backstop the economy, it will end up being a very costly misstep for every shape and size of business and, more importantly, the hard-working folks across the heartland.

The US Senate should be drawing on the experience of its failure to act fast in the 2008 crisis. Instead, it has yet again failed to act responsibly in the 2020 crisis. The proposed economic stimulus package is massive, but the longer the delay, the more colossal it will need to be to appease the markets, mainly when US initial claims are digested.

Unemployment is the key measure.

Unemployment will measure the extent of US policy failure, and now market participants are bracing themselves for a horrific peek into their future this week when US initial jobless claims are released. The high-frequency data will undoubtedly confirm we’re entering a vortex of the fastest and most substantial rise in the US unemployment in modern financial history.

In many ways, initial jobless claims will be the signpost that matters the most in the coming weeks as it will be a near real-time measure of whether fiscal policy worked.

No endpoint still 

Almost every economic and market outlook written – is now in the format of scenario analysis. But mostly it depends on how long lockdowns last. But frankly, the only reports that that matter is the ones coming from scientists where the longer containment time frame seems more likely. Suggesting that social distancing will be in place throughout most of 2020, where more draconian type lockdown rules could be relaxed and then fortified to ringfence virus hotspots flare or a second wave hits.

There’s probably so much more pain to come as when the notional growth devastation number totals are projected, and the tallies still may fall well short of the actual sum of all the losses to Global, European, and US GDP. So, stock market bulls and those who are typically the perma bids like pension funds are nervous about stepping back in too early.

I think the Olympics getting canceled is only the tip of the iceberg when it to sporting and other cultural events. And more significantly, how we intend to go about our everyday lives for most of 2020 not only will this be costly in an economic context, but the human toll on families is unmeasurable.

Oil markets

Optimism over a huge US fiscal number has helped dampen the oil market sell-off as the US fiscal policy is targeted as mitigating the negative employment shock and will effectively put money in people’s hands to buy gas.

While Oil bulls continue to hold on to a glimmer of hope after US Energy Secretary Dan Brouillette said the possibility of a joint U.S.-Saudi oil alliance is one idea under consideration to stabilize prices after a 48 % haircut in March alone.

The problem is, however, all the money in the world is not going to get people back on planes so long as the virus is spreading, and travel bans are in place. The fiscal deluge is a sentiment play as opposed to an actual demand-side pop, so the budgetary bounce will likely have a short duration bump on oil prices. But it will certainly provide a massive tailwind when the virus passes.

News flow on the demand side continues to run dreary with the spread of Covid-19 across the developed markets. It is now reaching colossal emerging markets oil importer like India, which is triggering complete shutdowns of massive oil-importing economies.

While the anticipated lengthy absence of air traffic presents a significant obstacle in its own right, but with the expected ramp in supply, which suggests storage will fill very quickly, and then prices will plummet as physical demand continues to evaporate.

But this will also effectively turn the wells off. The first balancing signs and supply-side effect are the initial waves of CAPEX cuts with the Baker Hughes rig count showing a significant fall of 19 oil rigs last week.

As far as the Texas OPEC coordinated effort, with the proliferation of small-scale producers in Texas (and across the US), it always made a coordinated US response unlikely. Still, as we will see by the drop in weekly rig count data, the low oil price may ultimately achieve the same end goal.

As with most growth asset classes, it doesn’t remain very easy to call a floor in the oil price. I expect a high level of volatility as the market responds to news flow, both positive and negative. Still, we should likely place more emphasis on an extended period of oil in the $20 with the occasional dip lower.

Gold markets

Gold surged after the Fed committed to unlimited asset purchases.

Gold should trade higher in the medium to longer-term but may face some selling and resistance near the psychological USD1,600/oz level as much will ultimately depend on the USD given the massive Fed policy deluge has hardly made a dent in the US dollar resiliency.

But the key for gold is how quickly the Fed swap lines can relieve some of the USD funding pain across global markets as if dollar funding returns to normalcy, and this will probably remove one of the primary reasons to sell gold.

Currency Markets

The USD has been incredibly resilient on the back of liquidity shortages and forced hedging by underhedged corporates and real money. It’s inconceivable by any stretch and by any economic model that the greenback can survive today’s Fed announcement unscathed.

Granted, we’re now entering the most significant monetary policy experiment in world history, but doesn’t all these dollars getting added by the Federal Reserve computers, cheapen the USD?

The Malaysian Ringgit

Higher oil prices and a slightly weaker US dollar should release some pressure on the Ringgit today, but we should expect the MYR to remain in the autoclave due to the covid19 domestic economic shocks.

 

We Are Concerned About The Real Estate Market – Part II

Hedge funds and banking institutions may already be feeling the pressure to attempt to contain the losses that are piling up (source: bloomberg).

An extended decline in the global markets will continue to place pressure on institutional financial markets, banks, hedge funds, and other traditional lending and investment firms.  Investors will start to pull investment capital away from risk (out of the markets and funds) and may expose some of these larger institutions’ excessive leverage and risk exposure in the process.

This is almost exactly what happened with Bernie Madoff when his firm, Bernard L. Madoff Investment Securities, collapsed in December 2008.  As long as there was no pressure on his firm from clients pulling out capital or asking too many questions, he was allowed to continue running his Ponzi scheme.  Once investors started pulling capital out of the firm and questioning the transactions/reports, it became evident that it was all a house of cards and would come crashing down quickly.

If larger investment firms and hedge funds are attempting to “buy the dip” at this point in time, we believe they are making a grave mistake.  We believe the downside risks associated with the Covid-19 virus event are just starting to unfold and the collateral damage that may come from this massive global shutdown that is currently taking place will be unprecedented.  We don’t believe there has been anything like this happening in any recent history – even WWII pales in comparison to this event.

News is starting to hit the wires about large investment firms and Real Estate investment companies sounding the alarm. The fear is evident in the short content of a news article.

“Loan repayment demands are likely to escalate on a systemic level, triggering a domino effect of borrower defaults that will swiftly and severely impact the broad range of stakeholders in the entire real estate market, including property and homeowners, landlords, developers, hotel operators, and their respective tenants and employees,” he wrote.

Just take look at the foreclosures in the major cities starting to spike in the maps below. This was before the virus closed down most businesses, and everyone losing their jobs. Give the fact that 70% or more of the world lives pay-check to pay-check, foreclosures and real estate values are likely to plummet lower to an extreme similar to how overpriced they are now.

I have talked about his in some presentations, and in videos in the past how real estate is grossly overvalued and when the music stops, prices will tumble. Huge opportunities for those who can preserve their capital until the recession matures enough will be able to buy real estate, businesses, and equipment for pennies on the dollar, but this will take another 1-2 years from now I imagine, but it will be great for those with money on hand when things get ugly.

Current Los Angeles Foreclosure Map
(Source: Zillow.com)

Current Los Angeles Foreclosure Map

Current San Francisco Foreclosure Map

Current San Francisco Foreclosure Map

Current New York Foreclosure Map

Current New York Foreclosure Map

Many of you may remember my Crunching Numbers article from just a week ago where I attempted to model what I believe would be the likely outcome of US GDP over the next 5+ years?  Well, it now appears others are following up with their own predictions for US GDP.   Based on some of the expectations within this Bloomberg article, my predictions pale in comparison to these comments.  Source: https://www.bloomberg.com

Now, let’s try to be realistic about how this entire process is likely to take place.  We know the economy will find a base (at some point) and attempt to recover from this virus event.  The question is what does that base look like and where is the bottom?

We won’t really know where the bottom is in the global markets until most of the unknowns have been processed, most of the collateral damage has been identified and processed, and consumers realize the bottom is in sight.  At that point, there is a real chance that the global markets will begin a recovery process that may eventually push to new all-time highs.

What we’re concerned about right now is the Q1 and Q2 economic activity and how that relates to consumer markets, credit markets, existing business enterprises and the potential collateral damage to hard assets like homes, commercial real estate and other foundations of wealth.  We believe the first few dominos of this event will be the collapse of jobs, earnings, and consumer spending.  The longer the global stays in a mostly shutdown economic environment, the greater the risks these critical numbers will implode – possibly taking with it the rest of the economy.

We believe the suspension of Foreclosures for a potential 12 month period may not reduce the total number of foreclosures across the US, we believe it may compound the problem.  The suspension effort is designed to help people stay in their homes if their incomes become threatened or lost.  But the reality is that a Foreclosure suspension will simply start to build larger and larger numbers of properties in foreclosure (waiting for the suspension to be lifted) while home prices potentially collapse.

We’ll dig into more data in Part III of this article and attempt to illustrate the data we believe will point to a clearer picture of how all of this may unfold in the near future.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

Oil Prices Are Ready for to Hit New Lows

The COVID-19 pandemic continues spreading worldwide and makes global governments enforce quarantine restrictions. The restrictions, in their turn, have a very significant influence on consumer activity. As a result, the global demand for energy commodities is decreasing as well.

The closer April the 1st is, when oil-producing countries-members of OPEC+ will no longer be bound by any agreements, the more nervous oil prices will be. There are reasons to believe that the market will be flooded with cheap oil and it might not only cause the chaos in prices but fix them on a very low level for a long period of time.

So far, the entire fundamental background is extremely negative for the oil.

Stay tuned to the RoboForex Blog for exclusive financial forecasts, professional expert analysis, how-to articles and more.

In the H4 chart, Brent is moving downwards. After breaking 26.00 to the downside, Brent may continue falling to reach 20.65. Later, the market may start a new growth with the first target at 30.03. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving below 0 and may enter the histogram area soon, thus indicating a further decline in the price chart.

HDD:TZ:Тексты:Еженедельная аналитика:23.03.2020:Нефть:BRENTH4.png

As we can see in the H1 chart, after finishing the descending impulse towards 27.63 and forming a new consolidation range around this level, Brent has broken it to the downside and may continue falling to reach 24.20. After that, the price may correct to return and test 27.63 from below.

Later, the price may start a new decline with the short-term target at 23.50. From the technical point of view, this scenario is confirmed by Stochastic Oscillator: its signal line has rebounded from 80 to the downside and continues a steady decline towards 50. After breaking 50, the next target to reach is 20.

HDD:TZ:Тексты:Еженедельная аналитика:23.03.2020:Нефть:BRENTH1.png

By Dmitriy Gurkovskiy, Chief Analyst at RoboForex


Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

USD/CAD Daily Forecast – Low Oil Stops The Canadian Dollar Upside

Weaker Oil Prices Have More Impact on USD/CAD Than Weaker U.S. Dollar Index

The Canadian dollar got temporary boost after the U.S. Federal Reserve announced its new unlimited quantitative easing program, but lower oil prices quickly put pressure on the Canadian currency.

The big problem for the Canadian economy at current low oil prices is that Western Canada Select oil trades at a very substantial discount to WTI oil. While the WTI oil is above $22 per barrel, the Western Canada Select oil is in the sub-$10 area.

Thus, any additional pressure on WTI pushes Canadian oil closer to zero, creating more downside for the Canadian currency. The impact of lower oil is especially visible today, because the U.S. dollar is losing ground against the broad basket of currencies following the Fed’s announcement.

The U.S. Dollar index has once again failed to cross the 104 level and corrected below 103 after the QE news. However, the market’s worries about the health of the Canadian economy in the environment of low oil and increased virus containment measures in its biggest trade partner, U.S., led to further weakness of the Canadian currency.

I’d also note that the U.S. has so far failed to sign a new coronavirus aid package, which is a near-term bearish catalyst for the U.S. dollar, but this does not prevent USD/CAD from the upside move, highlighting the strength of the current trend.

Technical Analysis

usd cad march 23 2020

The recent pullback in USD/CAD was short-lived, and the pair continues to move higher. The next major resistance is in the 1.4610 – 1.4670 area, near the recent highs. The previous major upside move in USD/CAD, which happened back at the end of 2015 – beginning of 2016, topped close to the same levels.

On the support side, the pair gets increased buyer interest above 1.4330. Currently, the upside trend remains intact, and it looks like the pair is ready to test the next resistance in the near term.

In my opinion, oil prices will dictate the dynamics of the following trading sessions. Should WTI breach the $20 level and bring Western Canada Select to new lows in the single-digit zone, USD/CAD will have good chances to get through the 1.4610 – 1.4670 resistance area and enjoy increased upside momentum at new highs.

Market News Report: March 23, 2020 – March 27, 2020

It has happened again. The scheduled economic data releases were much less important than virus crisis news last week. However, the coming releases are starting to show a severe economic downturn. So, markets will likely pay more attention to the economic data releases in the near future. Let’s take a look at the details.

The week behind

Global financial markets were much calmer last week following earlier risk-on assets’ meltdown. However, they continued to react to news about the ongoing corona virus crisis. The economic data releases were overshadowed by spreading pandemic fears again. But the economic data releases are starting to show a severe economic downturn: Thursday’s U.S. Unemployment Claims have been much worse than expected.

The week ahead

What about the coming week? It is very likely that investors will continue to react to the mentioned virus scare again this week. However, the market will also wait for the U.S. Flash Manufacturing PMI and Flash Services PMI numbers on Tuesday and the Unemployment Claims along with the Final GDP number on Thursday. We will also get the Eurozone data: PMI numbers on Tuesday and the German ifo number on Wednesday. The British Pound traders will await Thursday’s monetary policy update from Bank of England. Let’s take a look at key highlights:

  • On Tuesday we will get the U.S. Flash Manufacturing PMI and Flash Services PMI numbers. Then on Thursday, the Unemployment Claims and Final GDP will be released.
  • In Eurozone, on Tuesday we will get PMI numbers, including the German Flash Manufacturing PMI release. On Wednesday we will also get the German Final ifo Business Climate.
  • There will be important economic data from the U.K. this week, including Thursday’s Official Bank Rate, Monetary Policy Summary, MPC Official Bank Rate Votes releases.
  • Oil traders will await Tuesday’s and Friday’s inventories data releases.

You will find this week’s the key news releases below (EST time zone). For your convenience, we broken them down per market to which they are particularly important, so that you know what to pay extra attention to, if you have or plan to have positions in one of them. Moreover, we put the particularly important news in bold. This kind of news is what is more likely to trigger volatile movements. The news that are not in bold usually don’t result in bigger intraday moves, so unless one is engaging in a particularly active form of day trading, it might be best to focus on the news that we put in bold. Of course, you are free to use the below indications as you see fit. As far as we are concerned, we are usually not engaging in any day trading during days with “bold” events on a given market. However, in case of more medium-term trades, we usually choose to be aware of the increased intraday volatility, but not change the currently opened position.

Our Market News Report consists of two different time-related perspectives. The investors’ perspective is only suitable for the long-term investments. The single economic data releases rarely cause major outlook changes. Hence, we will only see a handful of bold markings every week. On the other hand, the traders’ perspective is for traders and day-traders, because the assets’ prices are likely to react on a single piece of economic data. So, there will be a lot more bold markings on potentially market-moving news every week.

Investors’ Perspective

Gold, Silver, and Mining Stocks

Tuesday, March 24

  • 9:45 a.m. U.S. – Flash Manufacturing PMI, Flash Services PMI

Thursday, March 26

  • 8:30 a.m. U.S. – Unemployment Claims, Final GDP q/q

Crude Oil

Tuesday, March 24

  • 9:45 a.m. U.S. – Flash Manufacturing PMI, Flash Services PMI
  • 4:30 p.m. U.S. – API Weekly Crude Oil Stock

Wednesday, March 25

  • 10:30 a.m. U.S. – Crude Oil Inventories

Thursday, March 26

  • 8:30 a.m. U.S. – Unemployment Claims, Final GDP q/q

Stock Markets

Tuesday, March 24

  • 4:30 a.m. Eurozone – German Flash Manufacturing PMI
  • 9:45 a.m. U.S. – Flash Manufacturing PMI, Flash Services PMI

Wednesday, March 25

  • 5:00 a.m. Eurozone – German Final ifo Business Climate

Thursday, March 26

  • 8:30 a.m. U.S. – Unemployment Claims, Final GDP q/q

EUR/USD

Tuesday, March 24

  • 4:30 a.m. Eurozone – German Flash Manufacturing PMI
  • 9:45 a.m. U.S. – Flash Manufacturing PMI, Flash Services PMI

Wednesday, March 25

  • 5:00 a.m. Eurozone – German Final ifo Business Climate

Thursday, March 26

  • 8:30 a.m. U.S. – Unemployment Claims, Final GDP q/q

USD/JPY

Thursday, March 26

  • 8:30 a.m. U.S. – Unemployment Claims, Final GDP q/q

GBP/USD

Tuesday, March 24

  • 5:30 a.m. U.K. – Flash Manufacturing PMI, Flash Services PMI

Wednesday, March 25

  • 5:30 a.m. U.K. – CPI y/y

Thursday, March 26

  • 5:30 a.m. U.K. – Retail Sales m/m
  • 8:00 a.m. U.K. – Official Bank Rate, Monetary Policy Summary, MPC Official Bank Rate Votes
  • 8:30 a.m. U.S. – Unemployment Claims, Final GDP q/q

USD/CAD

Tuesday, March 24

  • 9:45 a.m. U.S. – Flash Manufacturing PMI, Flash Services PMI

Thursday, March 26

  • 8:30 a.m. U.S. – Unemployment Claims, Final GDP q/q

AUD/USD

Thursday, March 26

  • 8:30 a.m. U.S. – Unemployment Claims, Final GDP q/q

Summing up, the financial markets will likely continue to react to scary news about globally spreading corona virus in the coming week. The scheduled economic data releases seem less important than monetary policy updates or news about governments’ interventions recently. However, if you’re an investor and not a trader, you should pay extra attention to Tuesday’s U.S. PMI numbers releases. On Thursday there will also be important economic data release from the Bank of England.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Market News Report – this analysis’ full version. The full Alert includes also the Traders’ Perspective which is very useful for the people who trade within shorter time frames. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

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Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Oil Gets Little Relief From Unlimited QE Program

The Announcement Of Unlimited QE Program Fails To Boost Oil Prices

As I wrote earlier, the U.S. Federal Reserve has announced an expansion of its quantitative easing program, promising to buy assets as long as it deems necessary. This news is a positive catalyst for most asset classes since more money would be pumped into the financial system.

However, oil has so far failed to get into the positive territory today despite this major positive news. The problem for oil is that despite heavy electronic trading, it is still a physical product that needs to be either consumed or stored.

In my opinion, the potential problems with oil storage in the future are serving as an increasingly important catalyst for oil prices. Previously, Goldman Sachs and Rystad Energy estimated that oil demand may be hit by 8 million – 10 million bbl/day by late March.

As new coronavirus containment measures are announced every day, the estimates for future oil demand will likely continue to be revised to the downside. Each day that supply exceeds demand, the excessive oil has to be stored somewhere.

Rystad Energy has recently estimated that 76% of the world’s oil storage capacity is already full and that oil stock builds at 6 million bbl/day should lead to full use of the capacity in several months due to various operational constraints.

Oil Traders Will Have To Track Coronavirus Closely To Estimate Damage To Demand

In current circumstances, oil traders have no option but to watch the spread of COVID-19 closely to estimate future containment measures and the subsequent hit to oil demand.

At this point, the situation continues to worsen, as the number of coronavirus cases in the U.S. got a major boost during the weekend, and further containment measures may be implemented to stop the spread of the virus.

It remains to be seen whether financial measures like unlimited QE could calm the markets, but it looks like oil prices will remain very sensitive to coronavirus-related news for the foreseable future as no financial magic can offset the negative impact from poor demand in real life.

The current trends in the coronavirus spread are negative and promise more containment measures in the future, so the oil price trend remains negative as well. In my opinion, it will be very hard for oil prices to have any sustainable upside without any stabilization on the virus front.

GBP/USD Price Forecast – British Pound Continues to Look Soft

The British pound initially tried to gain slightly at the open on Monday but as you can see, we have broken down towards the 1.15 level underneath. This is an area that of course is a very important from a psychological standpoint and has showed support of the last couple of days. The British pound has fallen rather precipitously, and quite frankly needs to see some type of relief rally or at least two “kill time” near this area in order to continue lower. The British pound is facing a lot of negativity on multiple fronts, not the least of which is the threat of closing down the country due to the coronavirus outbreak. However, let’s be honest here: the coronavirus was just the pin that was used to pop the global asset bubble that has been a huge factor of the last 10 years or so.

GBP/USD Video 24.03.20

One of the biggest issues facing the world right now is a severe lack of US dollars and therefore the US dollar will continue to be the strongest currency going forward. Think of it this way: most foreign governments price their bonds in US dollars, and therefore it automatically puts up a bid for the greenback. Ultimately, this is seen more so in some of the emerging markets, but it does have an effect everywhere. Just take a look at the Mexican peso as of late, or some of the even more exotic currencies. This of course has a knock on effect against other currencies like the British pound, albeit a little bit more dampened. I like the idea of fading rallies going forward, and I believe that the 1.20 level and just the simple threat of it is going to continue to put bearish pressure on these bounces. Buying this pair isn’t even a thought at this point.