ActivTrades’ Market Analysts prepared their daily commentary on traditional markets for April 6, 2020. This is not a trading advice. See details below:
Despite some weakness against both the dollar and the euro during Asian trading hours, the pound is back on the front foot during early trading in Europe. Sterling’s volatility stems from the admission into hospital of Prime Minister Boris Johnson and also by a timid global resurgence in risk appetite. Unless his condition worsens, news regarding the Prime Minister’s health is unlikely to have a long-lasting effect on the behaviour of the pound, as illustrated by the sudden change of direction that followed the start of trading in Europe.
Sterling is up by more than 0.5% against the dollar due to a recovery in risk appetite, which is also reflected in other risk-related assets such as stocks. It appears that the draconian measures to contain the spreading of the coronavirus are starting to pay off, with the main European epicentres for the disease recording lower numbers in infections and fatalities. Amidst the doom and gloom of the last few weeks these may be feeble rays of hope, but are good news nevertheless with investors quickly grabbing hold of them.
Even the best Hollywood movie director would have struggled to imagine the last few days for oil. The dramatic scenario seen last week, with WTI falling below $20 has been followed by a spectacular rebound of 50% in just two trading sessions. This happened when markets realized that the lower price, in conjunction with coronavirus, was becoming a huge problem for the US as well. Donald Trump’s tweet was seen by markets as an admission of sorts, making clear the US’ intention to try and achieve a higher price. It now faces the most difficult part as it is very complicated to find an equilibrium between cuts that are strong enough to have the necessary impact yet not too stringent so that other members of the alliance do actually adhere to them.
Technically, we have seen a jump from the bottom of $19.50 up to $29, followed by a drop at the start of the new week to see oil trading at $26. Given the price movement of the last few hours, it is clear that investors are still believing that some agreement will be reached, despite the unclear scenario. This helped the price to rebound to $27.5, while the situation remains strongly volatile as even a deal being agreed won’t sort out all the problems oil faces.
Stocks in Europe are trading significantly higher at the beginning of a new week after investors welcomed reassuring news on the evolution of Covid-19 over the weekend. The fact that nations like Italy, Spain and the US, who have been the most impacted by the deadly virus so far, have reported a slowing in both death toll and new daily cases on Sunday is reviving market sentiment this week. In addition to the reactions of governments and central banks to the crisis, many investors desperately wanted to see some progress on the actual spread of the virus to lift the uncertainty surrounding most markets.
However, it is still too soon to say the bottom is behind us now as this weekend’s reassuring numbers will have to be confirmed over the next few days with volatility on most stock markets likely to increase. All benchmarks are performing strongly in Europe today, led by the industrial and financial sectors this morning.
Today’s best performers are the German DAX-30 Index and Paris’ CAC-40. Technically speaking, the French benchmark opened up a bullish gap of 150 points at the market open today and this has pushed the price above their bearish trendline, invalidating the short-term bearish correction started at the end of March. This bullish signal has also been confirmed by the RSI indicator which has returned above the 50% level. The market cleared the 4,250pts-4,285pts zone and this level will now play a support role to the price while 4,335pts presents major resistance before fresh highs towards 4,470pts, 4,585pts and 4,700pts can be reached.