GBP/USD is still anticipated to maneuver in large consolidated fashion in the coming weeks, according to FX analysts at UOB Group.
24-hour view: “Expectation for ‘further GBP weakness’ was incorrect as it rose to 1.2327 before dropping sharply during late NY hours. Despite the relatively rapid decline, downward momentum has not improved by much. That said, there is chance that GBP could dip towards 1.2150. For today, a sustained decline below this level is not expected (next support is at 1.2100). Resistance is at 1.2280 followed by 1.2330.”
Next 1-3 weeks: “When GBP surged to 1.2200 on 27 Mar, we indicated that the ‘recovery in GBP has scope to extend higher but prospect for a move beyond 1.2550 is not high for now’. GBP subsequently extended its gain to 1.2484, traded sideways for several days before lurching lower last Friday (03 Apr) and came close to taking out our ‘strong support’ level at 1.2205. While the ‘strong support’ is still intact, upward pressure has dissipated with the sharp and rapid decline. The immediate risk from here is tilted to the downside but any weakness is viewed as part of a broad1.1950/1.2420 range (a sustained decline below 1.1950 is not expected).”
The dollar continues to fall around the board, leading to cable running currently reaching a 1.2340 session peak. Notably, from the main hourly moving averages, cable is checking important close-term rates at about 1.2319-28.
Hold a break beyond that and the close-term bias once again becomes more bullish. It opens up a path to the re-test of the 1.2470-85 potential last week. Further resistance is seen closer to the 1.2500 level thereafter.
Despite worries about UK Prime Minister Boris Johnson's health pound, dollar movements are the key driver of today's trading and US dollar appears to be weaker across the board in the risk- mood on the market.
US futures are now up 2% on the day, with European stocks also recording strong profits of more than 3% all over the board as risk rebound keeps running its course. The main hourly moving averages for cable is the main determining technical field right now so look to that as the catalyst of close-term sentiment in the upcoming sessions.
Japanese equities stay greater despite some tepid tones in U.S. futures during the session as we saw E-minis remove profits by 0.7% to fall by 0.5% before jumping back to sit higher by 0.6% as we enter European trading. The Hang Seng also rises by 1% on the day whereas the Shanghai Composite nears 2% rises as asian equities make the most of the optimistic mood to begin the week.
The US dollar appears to have faced some substantial resistance in the region of the 101.00 mark on Monday, in terms of the US Dollar Index (DXY), sparking the continuing retraction to the 100.50 area.
After four straight daily improvements including latest multi-day highs at the 101.00 mark boundaries on Monday, the index met with some resistance and caused a corrective decline to the present 100.50/40 band.
Meanwhile, a fresh wave of cravings for riskier assets has arisen in the Old Continent from the late after renewed optimism, as the coronavirus epidemic keeps losing momentum, especially in Spain and Italy. However, across the ocean, the US is bracing for a tough impact as contaminated cases and fatalities are predicted to hit maximum rates in the coming days.
Following Tuesday's corrective weakness and following last week's lows in the 98.30 area, DXY remains a bid above the 100.00 level. The advancement of the COVID-19 in the US and the effect on the economy that has slid into downturn later this year are being dealt with in the meantime. market attendees on the buck side tend to favor the dollar over other protection havens such as the Japanese yen and the Swiss franc in the event that risk aversion exists, along with its position as "world reserve currency" and store of value.
The gold benefited from its positive movement intraday positive and increased by nearly four weeks during the early US session, approximately $1648-50 region. After a moderate trade from the previous session, the precious metal regained traction on the first day of a new trading week and the rally seemed unaffected by a combination of negative factors.
The bulls ignored a solid recovery in global risk sentiment, as evidenced by strong stock market gains, but expressed concern about the economic impact of the coronavirus pandemic. Risk appetite was further boosted by rising US Treasury yields, which supported demand for the US dollar, but did little to dampen the bullish tone surrounding the yellow metal.
Meanwhile, the fact that gold was accepted above a month-old downtrend on Friday could only be attributed to a number of technical follow-up purchases. In addition, the price action also seems to indicate that investors are still playing safe in the expectation that the worst is not over yet, which supports the prospects for an extension of the bullish movement.
The GBP/USD pair have been battling with a 100-hour EMA and now withdrew about 30-35 pips from daily highs near the 1.2325 region. This comes after Friday's bearish break at the bottom of a week of the trading range, pointing to the emergence of new selling pressures.
Meanwhile, the technical indicators are mixed on the 1-hour and day charts, which did not support a solid short-term direction and warrant some caution for aggressive investors. Given the fact that the pair has donned something at a lower level, before the 1.2200 level, the bears are likely to expect a convincing breakthrough below the said level.
Below the stated level, the pair could become vulnerable and it seems likely that it will accelerate the fall to test the 1.2100 level in the near term. On the other hand, a sustained force above the 1.2350-60 area can be seen as a major trigger for the bulls and cause a short cover movement. In that case, the pair could aim to claim the 1.2400 round level before climbing to the next major hurdle near the 1.2475-80 resistance zone.
Risk markets are somewhat improving this morning, but as anticipated, TD Securities 'strategists' pessimistic crude oil risk balance.
“The Monday global OPEC+ meeting was too optimistic for the group to reach a negotiated agreement, and the meeting has been pushed to Thursday.”
“Prices are still holding relatively firm as optimism is high that an eventual deal will be struck, with many referencing the 10m bpd figure.”
“In our view, a double-digit cut is only plausible should the United States participate in the cuts, which at this point, seems to have a high hurdle for success as President Trump's communications suggest the country is not ready to commit to such an agreement.
“With negotiations ongoing, two-way risks remain particularly high. Nonetheless, the longer it takes to come to an agreement the more inventories swell and the more detrimental the demand shock will prove to be, which suggests even a large cut will not be enough to offset the shock, at least in the near-term.”
This week, FX markets could return to Europe. TD Securities strategists think that the latest EUR/GBP downside seems poised for a greater turnaround.
“On Tuesday, finance ministers from across the euro area will meet to discuss a package to help countries hit particularly hard by the crisis. This package now looks very likely to get approval.”
“With the Prime Minister now in the hospital, the market may be starting to sense a leadership vacuum is brewing on Downing Street. This could take sterling with it.”
“The end-June Brexit extension deadline continues to inch closer, providing an unnecessary and unwelcome distraction at a time of national emergency.”
“We have entered a long EUR/GBP position at 0.8785. Against a stop at 0.8605, we think 0.8740 should provide a primary backstop for a potential move higher this week.”
The GBP/JPY pair beat some of its strong initial gains and now lost about 70 pips of intraday swing highs near 134.50. The crossover brought in some purchases in dips near the 132.50 region, the lowest point of a multi-day trading range, and quickly ended a modest weekly bearish gap opening, led by weekend of the week. British hospitalization, Boris Johnson.
A radical change in global risk sentiment, as evidenced by strong gains in equity markets, undermined the safe haven observed by the Japanese yen and proved to be one of the key factors behind the initial phase of the positive intraday movement. of the couple. Meanwhile, comments from British Housing Secretary Robert Jenrick, who said he heard Johnson is doing well, helped calm the fear of any looming political complications and ultimately gave a further boost to the British pound.
Momentum remained unaffected by the downward revision of the UK construction PMI, which has fallen sharply since April 2009 and further illustrated the magnitude of the economic impact of the coronavirus pandemic. The crossover soared to almost a week, although it lacked a strong following. It started to lose momentum after a British prime minister spokesman said Johnson remains under observation in the hospital because symptoms persist.
Even from a technical standpoint, the crossover has remained within a broader trading range for the past week. Therefore, it is wise to wait for sustained progress in both directions before positioning for the pair's short-term trajectory.
Increasing crude crude oil prices in the second half of last week have helped to resilience the commodity loonie to US dollar and to close the USD/CAD pair by some 1.4200, 150 pipes lower than its weekly peak. The pair fell under the 1.41 handle at the beginning of the new week, but in the last few hours it rebounded. Through publishing, the pair traded at 1.4156 and still wiped out 0.3% daily.
The pair grew stronger during Asia hours after the headlines of the OPEC+ emergency meeting, which was delayed until Thursday, was highly pressured. Whereas the West Texas Intermediate Barrel washed off a significant portion from its early defeats, it fought hard to ascend upwards, making it impossible for the CAD to stand up to its peers. Actually the WTI barrel is down by 4.65% at $27.45 a day.
At the other hand, on the US Dollar Index, the pair's rebound strength is sustained by a minor daily profit of almost 100.80 on Monday. The Bank of Canada's Market Prospect Survey is expected to be released at 1430 GMT and does not provide any substantial macroeconomic data updates from the U.S.
Traders join for the day, the mood of the forex markets is "risk-on." The AUD, NZD battle for the strongest of majors, will get investors out of the safe havens like the JPY and CHF. Much of the dollars are lower with decreases against the AUD, NZD, CAD and GBP and increases vs. JPY, CHF and EUR. There was some stronger coronavirus headlines from position like Italy, Spain, even NY that improves the tone over the weekend. The Vix has a region down to 44.5. Returns are much greater.
For years, gold bugs were relegated to the fringes of financial markets. Often viewed by mainstream investors as tinfoil-hat conspiracists with basements full of beans and bottled water, their warnings sounded apocalyptic: a coming collapse in financial assets, widespread devaluation of paper money and global disasters that erode civil liberties.
Welcome to 2020.
As the coronavirus brings economies around the world to a standstill, gold is rivaling Treasuries and the dollar as the best-performing major asset this year. The metal proved its haven status with a 6% rally as almost $16 trillion was wiped off global stock markets and oil plunged.
There’s also been a scramble for physical metal as investors in exchange-traded funds build the biggest stockpile in history and dealers say they’re struggling to find gold to sell.
How Virus Shows Again Why Fear and Gold Go Together: QuickTake
“We’ve been trying to warn people that something like this would happen,” said Jim Rickards, the author of several books that predicted a coming financial reset. Rickards, who spoke from a New England mountain compound, has long recommended holding gold as a precaution for wealth preservation.
There’s echoes of many of the typical gold bug predictions in today’s crisis. Besides the obvious economic and financial-market upheaval, social interaction has become taboo and in some places soldiers are telling people not to leave their homes.
Global benchmark oil prices traded as much as $3 a barrel lower as the market opened for Monday's trading session, reflecting fears of oversupply after Saudi Arabia and Russia postponed to Thursday a meeting about a potential pact to cut production.
Late last week, prices had surged, with both U.S. and Brent contracts posting their largest weekly percentage gains on record due to hopes that OPEC and its allies would strike a global deal to cut crude supply worldwide.
The COVID-19 pandemic caused by the novel coronavirus has cut demand and a month-long price war between Saudi Arabia and Russia has left the market awash in crude. During the month, prices have plummeted as the market has waited for a plan to cut production from OPEC and its allies.
Over the weekend, Saudi Arabia sent a signal that a production cut deal may be ahead, potentially muting the price decline. U.S. President Donald Trump said he will put pressure on Saudi Arabia and its allies for such a deal.
"I don't know that anyone is going to get too aggressively short before the meeting," said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland.
Wall Street analysts and investors see a risk that stocks could retest recent lows in the coming days or weeks as they worry about the spread of the virus and its impact on the economy, although some spot glimmers of light at the end of the tunnel.
Wall Street's main indexes fell more than 1.5% on Friday as the coronavirus abruptly ended a record U.S. job growth streak. The S&P 500 (SPX) closed at 2,488.65, after rebounding about 13% from its intra-day late-March low, although it is still down more than 26% from its mid-February record high.
Markets have shown some signs of stabilization as investors parse a broad range of signals for clues on the trajectory they may take in coming weeks.
Some point to easing volatility and improving liquidity in fixed-income markets as signs that the worst of the sell-off may be over. Investor sentiment, often seen as a contrarian indicator, is one signal pointing to an eventual turnaround in U.S. stocks. Still, markets remain turbulent and far off their highs.
U.S. Surgeon General Jerome Adams warned on Fox News Sunday that "this is going to be the hardest and the saddest week."
Oil prices skidded on Monday after Saudi-Russian negotiations to cut output were delayed, keeping oversupply concerns alive, while stocks jumped as investors were encouraged by a slowdown in coronavirus-related deaths and new cases.
In currency markets, sterling fell 0.4% early in Asia after British Prime Minister Boris Johnson was admitted to hospital following persistent coronavirus symptoms 10 days after testing positive for the virus.
Brent crude fell as much as $4 after Saudi Arabia and Russia postponed their meeting, initially scheduled for Monday, to Thursday even as the virus pandemic pummels demand.
Equity investors, however, took solace as the death toll from the coronavirus slowed across major European nations including France and Italy.
"With a very light calendar globally today, there is enough momentum to keep the equity rally running through the course of the day and also into European time," said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.
"All bets are off after that although I could see a couple of days of positive sentiment ahead, especially if those mortality rates keep falling."
U.S. stock futures rose 3.2% during Asian trading after U.S. President Donald Trump expressed hope the country was seeing a "levelling off" of the coronavirus crisis.
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