ActivTrades’ Market Analysts prepared their daily commentary on traditional markets for April 17, 2020. This is not a trading advice. See details below:
The pound is down versus all other major currencies as European trading warms up on Friday. Despite the slight drift in market sentiment towards a greater appetite for risk, sterling appears to have missed that train, on concerns about the country’s economic prospects.
Yesterday the UK government extended the lockdown for another three weeks, as the coronavirus infection and fatality rates haven’t yet reached their peak while the Office for Budget Responsibility warned of a drop in GDP in the order of 35% during the second quarter of 2020. Then there is the ‘small matter’ of Brexit which, with time running out, is still there to be dealt with. All in all, today’s drop may just be the forerunner to more testing times ahead for the pound.
Ricardo Evangelista – Senior Analyst, ActivTrades
The gold price is declining on the strength of the greenback and the spot price has fallen below $1,700 again. Bullion is challenging the strong bullish trendline of the last two weeks (see attached chart) and whether the price holds above this significant support or falls through it will be crucial in determining if gold will rebound or if we are close to a break down. Investors are celebrating, perhaps a little too early, the apparent effectiveness of the Gilead drug in treating coronavirus and speeding up patients’ recovery from it. In this scenario, they are seeing less need to increase the percentage of gold in their portfolio and are moving back to some more risk-on assets.
Carlo Alberto De Casa – Chief analyst, ActivTrades
Oil remains in a bearish phase with the WTI price falling to a 18-year low. The spread between WTI and Brent is also widening with Brent proving to be much more resilient currently. This is a clear indicator of how much this oil crisis directly affects the United States and their producers, with the shale oil sector likely to be one of the casualties from the huge oversupply.
Stocks in Europe opened higher on Friday, extending gains from Asian shares as investors remain optimistic ahead of the weekend. The risk-on mood is holding sway despite yesterday’s negative US unemployment figures as well as last night’s disappointing GDP release from China, which led to increased volatility. This optimistic wind has been triggered after President Trump outlined a structured plan, welcomed by investors, regarding the re-opening of the US economy. Investors particularly liked the fact the country will reopen in stages, in a state by state manner, instead of ending lockdowns measures everywhere at the same time as this is seen as the best way to get the economy back to normal and avoid the likelihood of a second peak of COVID-19.
However, this risk-on trading stance remains fragile and strongly depends on each day’s news with corporate earnings likely to play a big role in determining sentiment. The earning season continues with more large European companies publishing their Q1 results next week with investors still struggling to evaluate the hit of the virus crisis to corporate results. As a result, this could lead to profit-taking moves before today’s closing bell.
The DAX-30 Index of Frankfurt is the best performer so far after the market opened with a solid 200-point bullish gap this morning. The 21-day moving average is going up, acting as a support for the price in the process, while the RSI indicator is showing significant bullish pressure with room to progress further. The market is now trading above 10,600pts and is likely to head towards the 10,790pts-10,880pts zone today (50% Fibonacci) but bearish corrections may take place below that level ahead of the weekend.