MARKET OUTLOOK · By March 10, the number of active cases had dropped quickly, as people recovered....
Transcript of MARKET OUTLOOK · By March 10, the number of active cases had dropped quickly, as people recovered....
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2020
MARKETOUTLOOK
Q2
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MARKET OUTLOOK
TABLE OF CONTENTS
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FOREX OUTLOOK
EURUSD: Soars on Coronavirus Panic
USDJPY: Roller-Coaster Ride Will Not End Anytime Soon
AUDUSD: Under Pressure on World Lockdown
GBPUSD: Trades Lower as Coronavirus Could Delay UK-EU Trade Talks
STOCK MARKETS TUMBLE AS INVESTORS PREPARE FOR THE WORST
GOLD PRICES MAY RESUME UPTREND AS QE IS EXPANDED AGGRESSIVELY
CRUDE OIL PRICES COULD RISE ON HIGH DEMAND IN Q2 AND
CORONAVIRUS RISK ABATING
CRYPTOCURRENCIES DROP AS THE SAFEHAVEN NOTION IS CRUSHED
THE MARKET ANALYSTS OF ATFX
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FOREXOUTLOOK
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4MARKET OUTLOOK
At the time of writing on March 10, the EURUSD had
experienced a roller-coaster movement. By February
20, the price had slid by 461 pips and reached my Q1
one target of 1.0787. However, as the second leg of
the coronavirus spread took form and engulfed Italy
with thousands of sick people, the EURUSD bottomed
out. On March 10, the pair reached a high of 1.1496,
and had rallied by 716 pips from its 2020 low, and
reached a new 2020 high.
There are many theories as to why the v-shaped bounce
took place, and we will cover the two main ones here: the
interest rate cuts by the Federal Reserve and the funding
currency behavior of the Euro.
The Euro as funding currency
If we focus on the latter, it suggests that investors started
to hedge loans in Euros and that it lifted the EURUSD
exchange rate. The explanation is simple. It is very cheap
to borrow Euros, and since 2015 the short-term interest
rate in Europe between banks has been negative. This
means that you get paid to borrow.
In the US, the interest rate has been positive, so an
investor would borrow in Euros and invest the money
elsewhere, like in US stocks or treasuries. However, when
market volatility picks up, the volatility in the invested
asset becomes higher than the interest rate differential
between the Euro and USD. That causes investors to
hedge their loans in Euros and support EURUSD.
This can explain why the Euro moved higher, although
the center of the second coronavirus crisis is in Italy.
As Europe is taking a different approach dealing
with the virus compared with China, it is likely that
we will see more people infected in Europe and that
the coronavirus crisis will extend for much longer.
The major difference between China and Europe is
that China was quicker to quarantine their population.
It took until March 9 for Italy to close down, and at
that point, 9172 people were already infected with
the new virus. However, the decision is good, and in
the next few weeks, it should have an impact on the
number of coronavirus cases in Italy. In China, it took
about two weeks for the percentage growth rate of
new cases to the peak. Italy’s action is also opening
up the possibility for France, Germany, and Spain to
follow, and if they go ahead, it could put a halt to the
spread in Europe. It would also slow the European
economy, and this could force the ECB to act, and cause
the EURUSD to stumble.
EU tries to wait out the Coronavirus spread
With the exception of Italy, it looks like EU politicians are
treating Covid-19, as a new and slightly worse flu. They are not closing their borders or asking people to work
from home. Instead, they insist that people continue with
their lives as usual which is putting 514 million European
citizens at risk. Government officials in some countries are already saying that up to 80% of people could get
infected, and in the UK, the PM said that 1/5 of workers
could be sick at the same time. In general teams, that
means that millions of people stand to get the virus,
and if the death rate of about 3% stands, the number of
deaths could be staggering. At least, for now, the EU is not
bothering to do anything about it. Still, when the number
of fatalities picks up, it is likely that temporary borders
and harder quarantine measures will be implemented. If
the borders are closed, the Eurozone could slump into a
recession. As long as the risk remains that we could see
a worsening mood because of the virus, the Euro should
remain supported.
EURUSD: Soars on Coronavirus Panic
By Alejandro Zambrano, Global Chief Market Strategist, ATFX
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5MARKET OUTLOOK
EURUSD Daily Chart
Interest rate differentials
There is also a theory that the EURUSD rallied higher
because of the 50-bps rate cut by the Federal Reserve in
early March, and there are current expectations of further
rate cuts at their March 18 meeting. However, with rate
cuts already implemented, and another one priced in,
I think it is unlikely that the Fed could do more to cause the
USD to slide unless they opt for quantitative easing.
In the case of the ECB, the outlook is different. They have
so far refused to cut rates and appear to be hoping for EU
governments to step in. However, with the Fed, Bank of
Canada, and Reserve Bank of Australia cutting interest
rates, the ECB could be pressured to act. If they do, then
this could tilt the balance in favor of the USD.
Technical outlook
From a technical point of view, the channel that I have
been working with since last summer has failed as the
price traded above the upper-downward trendline. It did,
however, predict the slide to the 2020 low before the price
took out the upper trendlines of the channel. The EURUSD
is also trading above the 200-day moving average,
currently at 1.11.
The short-term trend will remain upwards in the very
short-term and the next target could be the January
2019 high of 1.1569, fol lowed by the September
2018 high of 1.1815.
However, the RSI-14 is overbought, and as mentioned
above, the ECB might act next. Thus, I think investors
will be reluctant to chase the EURUSD at current levels.
Instead, if the EURUSD can remain below the January
2019 high, I suspect the EURUSD might seek out the
200-day-moving average at 1.11 in the next few weeks.
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6MARKET OUTLOOK
As with many other Forex pairs, trading in the USDJPY
during Q1 was a roller coaster experience. I suspect
Q2 will be similar, and the outcome will depend on the
coronavirus situation.
The economic situation in Japan tends to have a low
impact on the currency until the Bank of Japan decides to
embark on large QE and rate cut programs, and in recent
years they have not altered their strategy too much. The
currency tends therefore to follow the mood of global risk
appetite. Two main indicators of this are the US-ten year
government bond yield and the Japanese stock market:
the Nikkie 225.
The ten-year government bond yield was around 1.973%
at the end of last year while stock markets were booming.
However, from the start of 2020, the yield curve started
to drift lower, and as news broke about the coronavirus in
China the yield turned aggressively lower. Then as crude
oil prices dropped by nearly 30% in one day due to Saudi
Arabia increasing production, the yield dropped hard and
reached a low of 0.3595. The lower yield on the back of
lower crude is warranted given that inflation will be lower than usual because of the sharp drop in energy prices.
However, following the strong decline on news of the
price war, the yield has stabilized.
The Nikkei 225 was also affected by the virus panic and
slowdown of China, as well as the high risk of the Japanese
Olympic games being postponed. The stock index was
down by 27.87% from its 2020 high on March 12, and
could probably add another 12.5% loss, taking the price
to the 2016 low of 14986. However, what is important
now is how much of the negative news is priced into the
stock and US government bond yield.
The drop in the bond yield is, from a technical
perspective, overdue. While the Japanese stock index
has further to go because of a large rectangle pattern
in the Nikkei 225 that formed from February 2018.
If we take a look at the current global situation, there are
governments acting decisively however most are not
doing enough to stop the spread. There I expect USDJPY
could remain under pressure.
USDJPY: Roller-Coaster Ride Will Not End Anytime Soon
By Alejandro Zambrano, Global Chief Market Strategist, ATFX
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7MARKET OUTLOOK
USDJPY Weekly Chart
On the weekly chart below, the USDJPY formed and
triggered a major descending triangle pattern. The
pattern is made up of the 2018 low of 104.56, a level
that the price nearly revisited in late 2018, and also
touched in 2019. In the week of March 9, the USDJPY
gapped below the support level and triggered the
pattern. However, as the week was coming to an end
it looked to be a false breakout of the pattern. The
breakout will only be confirmed if the price closes below
104.56, yet a close near to 102 would have been
better. If the price indeed closes below 104.56, the
pattern suggests that the price could reach the 95.95
level. On the way to the 95.95 level, the price would
need to breach the 2016 low at 99.47. Should the price
not close below 104.56, the breakout is considered a
false breakdown, and the price might rally to the March
high at 108.60. If the price trades above the March
high, the price might reach the 2020-high of 112.
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8MARKET OUTLOOK
AUDUSD: Under Pressure on World Lockdown
The Austra l ian Dol lar has been af fected by the
Coronavirus crisis, and it offered a few easy to read
trading opportunities in the first quarter. The move lower in the currency was understandable given that about
38% of Australian exports go to China. The China PMI
release in February confirmed that the economy came to an almost complete halt due to the coronavirus breakout.
To top it off, the RBA cut interest rates on March 3.
The RBA cut interest rate by 25 basis points to 50%.
Unconventionally, the AUDUSD actually traded higher on
this news. Problems for business and limitations to travel
were cited as a reason to cut interest rates, as well as
lower employment growth and lower inflation.
Typically, a currency will decline when the central bank
reduces its interest rates. Yet the currency gained and
remained relatively unchanged since the rate cut. The
reason for this is that the rate cut was already priced in,
and the currency pair was already down close to 600
pips from December 31, 2019 high.
The situation in China has also improved. The peak in
coronavirus cases growth occurred in mid-February.
By March 10, the number of active cases had dropped
quickly, as people recovered. In Hubei, which was the
most affected region, 47,743 people have recovered,
leaving 20,017 people still affected, a drop of 70.5
percent, from the high of 67,760 cases. Even President
Xi, visited the most battered city, Wuhan, on March 10, to
show that the risk was abating. China is now pushing to
get people and workplaces back online, and this should
limit the slide in the Australian Dollar. On March 11, the
FT published an article showing that coal consumption
at China’s six largest independent power producers
was down by 30% from before the Chinese New Year.
Other indices showed that Freight logistics activity was
only 17% from the pre-holidays levels, however, traffic
congestion and subway traffic in major cities were still
operating at just 50% of its typical level.
Despite the positive signs in China. It is too early to know
what will happen in Australia because the virus on March
11 had only infected 107 people. However, the WHO
had just declared a world pandemic, and are pushing
countries to do more. As the WHO has raised the alarm, it
should encourage countries to do more to limit the spread.
If the virus spread is contained and we see numbers peak
in Europe and the US over the next few weeks, we could
see the Australian dollar receive support. If the virus is
allowed to spread it will probably just delay the inevitable
shut down of large parts of Europe and the USA.
By Alejandro Zambrano, Global Chief Market Strategist, ATFX
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9MARKET OUTLOOK
Technical outlook
Technically, the outlook for the Australian dollar remains
downwards as traders look for better signs in the data
that the coronavirus spread will abate. The trend is
downwards below the March 9 high of 0.6685, and if the
markets were to correct to the 0.6520 - 0.6685 range,
I suspect traders will try to use this opportunity to short-
sell the pair. As the long pair remains below the March
9 high, I suspect the price might reach the 2009 low of
0.6349, followed by the 2008 low of 0.5997. However, on
a break to the March 9 high, I suspect trades will lift the
pair to 0.68, followed by 0.69.
AUDUSD Daily Chart
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10MARKET OUTLOOK
GBPUSD: Trades Lower as Coronavirus
Could Delay UK-EU Trade Talks
The GBPUSD had lost about 5% in 2020 as two and a
half weeks of trading remain in the first quarter. The British pound decline against the dollar was not unique, many
currencies lost ground from the start of the year. The GBP
didn’t gain against the Euro, which was one of the few
currencies to rally off the coronavirus spread.
The reason for the limited support to the GBP is because,
unlike the Euro, it is not a funding currency. GBPUSD saw
a big boost in Q2, 2019 when Boris Johnson was elected
PM. GBPUSD then spiked higher when the Tories got a
majority in parliament in December. It was then brought
back down to earth after the general election as the PM
made it law that the UK will leave the EU by the end of
2020, with or without a trade deal with the EU.
GBPUSD was also under pressure because of the
coronavirus outbreak. It’s close proximity to European
countries that are affected has had a knock-on effect.
On March 13, France and Spain are lagging Italy
by a week but the UK is fur ther behind, by one to
two weeks. The effect of the virus will also hurt the
US and so could have a neutral effect on GBPUSD,
it just depends on who bounces back better after
lockdown.. The ripple effect of the virus will most likely
delay and disrupt EU-UK trade deal negotiations
as the EU and UK deal with the economic fallout of
the virus. The risk for a hard Brexit will continue to
limit the buying interest in the GBPUSD. As for the
fundamentals, they remain for now with the US, as the
UK and most of Europe are growing slower than the US.
I, therefore, think the GBPUSD could remain under
pressure in Q2, 2020.
By Alejandro Zambrano, Global Chief Market Strategist, ATFX
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11MARKET OUTLOOK
Technical outlook
From a technical point of view, the GBPUSD is trading
within the 1.1942 to 1.3367 range, and in March the price
slid below the November 2019 low of 1.2761, opening
the door for further declines in the weeks ahead. The next
support level, as seen in the chart below, is the October
2019 low at 1.2195, however, the price is also short-term
oversold, and in a range, thus I do not think long-term
traders will be selling the pair at current levels. GBPUSD
could be forming a major inverse head and shoulders
pattern, with the 2018 low being the left shoulder,
the 2018 low being the head, and the right shoulder
possibly forming in the weeks ahead. Today, it is too early
to know what may happen with the head and shoulders
pattern, but what is clear is that the trend is downwards
below the January 31 high of 1.3209 If the price were to
bounce back to the November 2019 low at 1.2761, I suspect
that investors will see this as an opportunity to short-sell
the pair. If the price indeed turns lower following a bounce,
I suspect it could reach the October 2019 low at 1.2195,
followed by the 1.20 level.
GBPUSD Daily Chart
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STOCKMARKETS
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13MARKET OUTLOOK
STOCK MARKETS TUMBLE AS INVESTORS
PREPARE FOR THE WORST
Stock markets started this year in impervious fashion,
fighting off the bearish sentiment coming from armchair experts on Twitter. That was until the coronavirus hit.
The coronavirus started in Wuhan, China, where despite
the outbreak being severe, western stock markets didn’t
take much notice. In fact, after the first cases were reported in December 2019, indices continued to rally.
Stock markets began to waver as they saw China
banning people from leaving their homes and going to
work. Forcing a large portion of its workforce to stop
working resulted in reduced output and ultimately an
economic slowdown. The world is now waiting to see if
China will be able to bounce back.
Large scale stock market anxiety started once it was
clear that the virus had spread outside of China. As
Europe started to report more new cases than China, the
sell-off was exacerbated. Investors went into flight mode, buying up safe-haven bonds and dropping their stocks.
Coronavirus
The second quarter of 2020 will be determined by the
handling of the coronavirus. With global indices all
affected, investors will be looking at the speed of the
outbreak and the rate of recovery.
Governments are prepar ing and implement ing
contingency plans to combat the virus however it’s these
plans that could hurt the stock markets further. Stopping
people going to work will reduce service and product
output. The ripple effects will hit firms’ revenue and will slow the economy.
Governments will be judged by their actions to manage
the virus situation and their economies. Expectations are
that this will pass but it is the period from now until then
that will affect global stock markets.
Mark Carney described this as a ‘disruption’ rather
than a ‘destruction’, referring to the 2008 crisis. So whilst
we are seeing large losses, the expectation is still that
this will be contained and that the markets are robust
enough to cope.
Whilst it’s unlikely to see an immediate bounce back to
the highs, it’s also unlikely we’ll see investors running to
the hills like 2008.
Presidential Election
The Trump administration will be gearing up for another
(likely bitter) election campaign.
By the 6th of June, we should have a clear picture of who
is going to challenge Trump for the presidency. At the time
of writing, Joe Biden and Bernie Sanders are leading the
race for the Democratic nomination. Michael Bloomberg
was a contender who could match Trump in the
campaign financing arena but has since endorsed Biden, ending his campaign.
The Republican party, albeit smaller, is a cohesive
unit with members similarly aligned in their views and
ideologies. The Democratic party is a larger entity but
has more fractions and differences in views. Traditionally
they believe that a right-leaning candidate is needed to
beat off the Republicans.
By Cameron Bowen, ATFX UK
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14MARKET OUTLOOK
The Biden resurgence appears a case of the moderates
waiting to see who was left before they put their weight
behind one candidate. The last man standing was
Joe Biden. This is the democratic party trying to avoid
Sanders as their nominee, whom they see as a socialist
unlikely to beat Trump.
Whilst Bidens come back looks good on paper, in
reality, he looks a long way off defeating Trump. He fell
flat in early state pollings, had poor performances in
debates and still hasn’t had the endorsement from his
‘best friend’, Barack Obama. The ‘last man standing’
nominee will always struggle to win an election.
With the acquittal of Trump’s impeachment trial and fairly
weak Democratic nominees, there aren’t many blockages
to derail Trump’s second term hopes.
How does this affect the stock market? Markets don’t like
uncertainty and the threat of a left-leaning president will
create questions about monetary policy. Therefore, the
closer a nominee like Sanders gets to office, the more nervous will index investors will become.
But, even with Sanders as the nominee, we’d need to
see a major shift in public opinion before stocks start to
worry. It wouldn’t be surprising to see a similar result to
the crushing defeat Jeremy Corbyn’s UK Labour party
received at the hands of the conservatives. This was
during the UK’s general election in December 2019.
US-China Trade War
We can assume, true to fashion, that any victory Trump
receives will be paraded in front of the American public.
This leads us to the US / China relations.
A truce is in play between the two superpowers, with both
able to take a victory back to their respective electorates.
Trump, the instigator of the trade war, is unlikely to be
looking for any trouble during his election campaign.
So we should expect to see indices take comfort in that
during the second quarter.
China’s victory is that it limited the risk of trade shock and
that this truce will help requirements to reduce debt levels.
Thus, boosting investor confidence.
Central Bank easing
With the plummeting stock prices due to coronavirus,
the Fed has moved quickly to make its largest cut since
the 2008 financial crisis. Other central banks are also threatening similar measures, which should encourage
spending and in theory, see stocks up.
But whether theory stands up in practice is another
question. Central bank policymakers have been saying
it for a while but now we’re hearing it from investors
and economists - there’s not a lot monetary policy can
do to boost the global economy. So it’s unlikely we’ll
see too much effect from any central bank easing,
on the real economy, however, stock market traders
tend to send stock much higher on interest rate cuts
and quantitative easing.
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15MARKET OUTLOOK
The above chart shows the two largest weekly candles
in terms of monetary value the S&P has ever had. After the
initial aggressive sell-off, we saw the S&P approaching
major support levels which held on the 30 September
2019 at 2855, the 5 August 2019 at 2822 and the 3 June
2019 at 2728.
It has since blown through those support levels,
where we now have the 2018 lows of 2346 as the
next level of support.
Given the direct trajectory of this market, bias is most
certainly bearish. The short term future of this market
will ultimately come down to how the spread of the
coronavirus is handled. How long will countries be put on
lockdown and how long before they can start to get back
to the types of output we witnessed prior to the virus.
Whilst major global events like central bank easing,
the U.S Presidential election and any trade wars would
normally play a large role in stock indexes, the current
market will act on how the coronavirus is handled.
With most countries now starting to take the threat
seriously, there will likely be a period where things get
worse before it gets better. Stock indices are still very
volatile but they will be getting used to this news and
despite the expected worsening, investors can now see a
light at the end of the tunnel.
I expect to see continued volatility in the coming weeks but
I think we will see it soften. A push lower to the support of
2346 on 24 December 2018 is expected but it might not
come immediately.
S&P 500 Technical outlook
S&P 500 Weekly Chart
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GOLDOUTLOOK
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17MARKET OUTLOOK
The global outbreak of COVID-19 has impacted the world
economy and financial system, sending markets into turmoil, with global stock indices seeing sharp falls. As the
global economic and financial system has been hit, spot gold has climbed to $1,702.
In March last quarter, the US Dow futures gave up 32%
of its value from its 2020-high, creating the largest
monthly drop since the 2009 subprime mortgage crisis.
The panic in the financial market triggered a sharp rise in the price of US Treasuries, with yields falling to levels
last seen in the 2008/2009 financial crisis. With Treasury yields near zero, the Federal Reserve and central banks
around the world rushed to slash interest rates, and
the FED restarted quantitative easing this tends to be
supportive for gold prices.
If the global economy does not pick up in the second
quarter and panic leads to increased risk aversion, spot
gold could rise even further to a nearly eight-year high of
$1,795. However, it is important to note that the global
stock market crash might make the value of stocks
relatively more attractive to gold. In addition, people that
have been long gold for a while, might soon be interested
to book their profits. If the spot gold price is unable to break through the previous peak of $1,921, the price may
trade significantly lower.
It is expected that the pandemic of COVID-19 is to be
contained in the next quarter. If so, there will be no need
for central banks to launch more aggressive monetary
easing policies and the spot gold price could trade lower.
GOLD PRICES MAY RESUME UPTREND
AS QE IS EXPANDED AGGRESSIVELY
By Martin Lam, Chief Analyst of Asia Pacific, ATFX
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18MARKET OUTLOOK
Technical outlook
According to the spot gold weekly chart, the price took
a sudden turn after it hit an all-time high of $1,921 in
September 2011, a low was then created at $1,045 in
2015. Following the low, it rebounded and climbed again
to recent highs of $1,700. With the technical indicators
like the RSI being overbought, the price of gold has
seen a reversal, and it’s expected that $1,422 will be an
important first target and support level. If it fails to breach this support level, spot gold is still expected to test the
85% of the Fibonacci retracement, a target of $1,791.
And whether the spot gold price can reach $1,921 within
or after the second quarter, will be decided by a variety of
fundamental factors. For example, the spread of the novel
coronavirus, the monetary policies of the Federal Reserve
and other major Central Banks in the world, as well as
the performance of global stock markets. If the pandemic
can be contained and the global economy recovers
steadily, Central Banks will not have to further loosen
monetary policy and global stock markets will rebound. It
is estimated that the spot gold price is expected to drop to
$1,422 after an initial test of $1,795.
XAUUSD Weekly Chart
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CRUDEOIL
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20MARKET OUTLOOK
At the end of last year, the United States eased trade
restrictions on China and Europe on the assumption
that it would benefit the global economy and l i ft
up crude oil prices.
However, the outburst of COVID-19 and its rampant
global spread in the start of 2020 has disrupted the global
economy and sent financial markets lower. Numbers of infections are rising fast in the United States, China, and
Europe, the three largest economies of the world and it’s
sending shockwaves through the markets.
Manufacturing and services industries worldwide have
been adversely impacted sending oil prices down by
30%. In addition, OPEC’s failure to reach an agreement
with other oil-producing countries to cut oil supply has
sent the oil prices to a five-year-low.
US oil futures fell as low as $27.6 a barrel, while Brent
Crude Oil dropped to $31.4 a barrel, not far from their
2016 lows. Seasonality analysis suggests that Crude
oil prices could rise in April and extend throughout the
second quarter, excluding adverse factors to crude oil.
If governments manage to contain the pandemic and
OPEC and other countries agree to cut output, then we
will see oil price stabilize. Should this happen I believed
that the US and Brent oil futures will rebound amid the
surge in crude oil demand.
CRUDE OIL PRICES COULD RISE ON HIGH
DEMAND IN Q2 AND CORONAVIRUS RISK ABATING
By Martin Lam, Chief Analyst of Asia Pacific, ATFX
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21MARKET OUTLOOK
USOIL Weekly Chart
WTI Crude Oil
Technically, crude oil prices were forming a large inverse
head and shoulders with the March 2015 low being the
left shoulder, and the June 2017 level being the right
shoulder. However, as the price traded below the right
shoulders at $42, the pattern failed, and US oil fell sharply
to a low of $27.6, approaching the bottom of $25.87 in
2016, a 4-year low.
If the price of US oil futures break the 2016 low and
reaches $25 then it will open the door for a test of the
$15 level. On the contrary, if crude oil prices hold above
$25.87 then I expect it to retest $39.70 and potentially
trade above $51.56.
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22MARKET OUTLOOK
Brent Crude Oil
For years, the Brent oil futures have moved roughly
in line with the US oil futures, this is the case again
as pr i ce was fo rming a s imi la r ly la rge inverse
head-and-shoulder that fai led.
If Brent oil futures fail to break the 2016 lows and
rebound, in turn creating a reversal formation, we can
expect to see the levels $51.56 and $54.75 tested
respectively after the current.
UKOIL Weekly Chart
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CRYPTO-CURRENCIES
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24MARKET OUTLOOK
CRYPTOCURRENCIES DROP AS THE
SAFEHAVEN NOTION IS CRUSHED
The f irst quar ter of 2020 star ted well for the
cryptocurrency market. But like traditional financial
m a r k e t s , i t a p p e a r s t o h a v e b e e n a f f e c t e d
by the coronavirus.
The fact that cryptocurrencies have fallen in value during
the coronavirus will disappoint many crypto enthusiasts.
There is a contingent of cryptocurrency investors that
are adamant bitcoin is turning into a safe haven asset.
However, based on the coronavirus case study, this
theory is incorrect.
The majority of the market volatility started on the 20th of
February, which saw stock markets plummet over 20%
in some instances and safe havens rally. Therefore, we’re
still in the dark as to what bitcoin actually is and how it’s
perceived by investors.
The majority of the market volatility started on the 20th of
February, which saw stock markets plummet over 20%
in some instances and safe havens rally. Therefore, we’re
still in the dark as to what bitcoin actually is and how it’s
perceived by investors.
The theory still stands that the majority of coins are held
by a handful of whales that dictate the price movements.
Bitcoin Halving
The most notable event that’s happening this quarter is
bitcoin halving for the third time.
Bitcoins are rewarded to miners who add a block of
transactions to the blockchain. Every 210,000 blocks, the
amount of bitcoins rewarded is halved. We can’t predict
the exact date this will happen but we expect it to be
during the second half of May this quarter.
There is a cap to how many bitcoins can be mined -
21 million. Therefore every halving means the supply is
reducing. In traditional markets, a reduced supply would
result in price increases. Bitcoin has proven to be no
different during its previous two halvings.
Both halvings have seen the price increase to new
all-time highs. However, this time around bitcoin has a
few more headwinds to face.
During its early years, it was only enthusiasts that were
involved in the crypto market. These are the people who
believed in the project and so were only buyers, causing
a steady price increase. 2017 saw a monumental bull
rally, which forced financial institutions to take note. The participation of these institutions means there are more
sellers involved. And with the introduction of derivatives,
now sellers don’t need to own the asset before they sell it.
Short-term we can expect to see some volatility. But as
the market is maturing and liquidity is increasing, don’t
expect to see an immediate rally back to the highs.
By Cameron Bowen, ATFX UK
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25MARKET OUTLOOK
Weekly Bitcoin Chart
Bitcoin Technical Analysis
Due to bitcoins infancy, there isn’t too much data to
analyse previous price patterns. Looking at the weekly
chart we can see that the market was unable to break the
11 December 2017 highs of $19,666 and has since taken
out the 16 December 2019, low of $6,425.
With the break of the low and the failure to take out the
24 June 2019 high of $13,880, we now have confirmed bearish bias and a downtrend with two lower highs and
two lower lows.
The next level of support is the lows of 10 December 2018,
at $3,126, followed by the 10 July 2017 low of $1,830.
Bullish sentiment would come in if this market fails to
take out the lows of 10 December 2018, at $3,126 and
then breaks through the 24 June 2019 high of $13,880.
Whilst that is unexpected at the moment, with the
current market climate and bitcoin’s notorious reputation,
I wouldn’t completely write it off. On the off chance that
does happen, the next resistance level will be the all-time
high of $19,666.
Facebook’s Libra
In other news, Facebook’s L ibra is st i l l t r y ing to
get off the floor.
The Libra project is designed to make the transfer of
money online easier and cheaper. But sceptics say that it
is another ploy to attract new users to the social network.
This has all but been confirmed by Zuckerberg himself, who acknowledged that people using Libra would likely
drive up the cost of advertising on Facebook. Ultimately
benefiting the company.
Originally Facebook said it wanted to launch Libra in the
first half of 2020, which would make Q2 the expected launch date. But with dwindling support the project it
looks like this will be a tough ask.
Mastercard has been the latest company to jump ship but
there are still signs of life as Shopify has been added to
the group. The problem being is that Shopify is only the
21st member of the 100 originally required to launch. No
update has been given about a revised launch date.
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26MARKET OUTLOOK
This information has been produced by a third party, for general information purposes only, and is not
indicative of future results. AT Global Markets UK Ltd (ATFX UK) takes no responsibility for its accuracy or
completeness. Any opinions expressed do not reflect those of ATFX UK. This information does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. It has not been prepared in accordance with legal
requirements designed to promote the independence of investment research and as such is considered
to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We
aim to establish and maintain and operate effective organisational and administrative arrangements with a
view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. You should seek independent advice before making investment
decisions. Reproduction of this information, in whole or in part, is not permitted.
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You should consider whether you understand how CFDs / Spread betting work and whether you can afford
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Please note: If you are a Professional client, you are not eligible for negative balance protection and you could
lose more than your initial deposit.
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27MARKET OUTLOOK
THE MARKET ANALYSTS OF ATFXTHE MARKET ANALYSTS OF ATFX
Alejandro Zambrano ATFX Global Chief Market Strategist
Before joining ATFX, Zambrano has been using his invaluable experience to research the financial markets with a special focus on currencies and macroeconomics, throughout his career. He
also covers commodity markets and equity indices. Working for various brokers, Zambrano also developed premium educational programs, and hundreds of people have attended his courses
throughout the years.
Cameron Bowen
ATFX Senior Content Manager
Cameron Bowen is an experienced trader that worked for an Asset Management firm where he assisted in the analysis of an automated trading strategy that required a discretionary overlay. He
also taught in renowned Forex and CFD trading academies in London, creating course material
and regularly hosting live market analysis webinars. Today, he works with ATFX in helping their
clients to understand the markets better.
Martin Lam ATFX Chief Analyst of Asia Pacific
Martin has over 20 years of experience in global investment and consultation. Familiar with
the world stock indices, precious metals such as gold and silver, crude oil and forex. Martin
manages the “Martin Currency Trading Company” and it has in the past worked with a number of
well-known international financial corporations and institutions. Martin is a sought speaker, and has held over 40 seminars and training sessions in South East Asia and China in 2018 and has
been publishing daily market reports for investors.
Dean Chen ATFX (China) Senior Market Analyst
Dean has participated in the global capital markets for over six years with experience to operate
with capital up to 150 million RMB. He has served various positions including risk controller, trader,
and analyst, and has received recognition from numerous industrial key players. Dean has created
the “Hook-Shaped Theory” trading system, and it combines both technical and macroeconomic
analysis, to help with the precise timing to enter and exit the FX markets.
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