FOREX-Royal Bank of Australia decided to keep rates on hold

It has been a good week for the Australian dollar, gaining more than 5% to the US dollar since the opening of the market on Monday. The Aussie’s vitality comes from all the stars aligning in support of the currency. On Monday the Royal Bank of Australia decided to keep rates on hold at a time when other central banks are cutting while the recovery in oil prices also helped as the Australian dollar’s performance is closely linked to that of commodities in general. Finally, the improvement in market sentiment, with investors glass half-full stance is also offering support to the risk-related Aussie following signs that the number of coronavirus infections is declining in Europe and the US, the current epicentres of the disease, as well as the reopening of Wuhan for business after three months of quarantine.

EUROPEAN SHARES-Мarket is being pushed

Shares are trading higher in Europe on Thursday despite a shy market open and modest rises overnight by most Asian stocks. The appetite towards riskier assets seems to be back on track on what’s set to be a busy day before the Easter weekend. Even if uncertainty remains on the timeframe for economies to re-open and on how hard it will be for them to recover, investors seem to be willing to extend this week’s rally with fresh highs likely today. Volatility is also likely to be on the rise today as many market participants will be cautiously monitoring a batch of important data releases coming from both Europe and the US. 

The Stoxx-50 Index is approaching strong technical resistance levels and the fact that the current short-term bullish trend is slowing down as the market nears these levels is a cause for concern. Although markets may still initially climb higher, the temptation for investors will be to take their profits and reduce their exposure to risk markets, as long as there doesn’t seem to be any significant improvements in the struggle against the pandemic.

Currently, the market is being pushed by financial and discretionary consumer shares with companies like BNP Paribas, ING, Adidas and Daimler among the largest movers. The DAX-30 of Frankfurt is the best performer in the eurozone with the market trading close to 10,600pts. Technically, the market has opened the way for an extended rally towards the gap between 11,000pts and11,540pts zone after the prices cleared its last Speedline. However, the MACD indicator also shows a trend slowdown with a bearish divergence and this should be taken seriously as the DAX, like the Stoxx-50, is also approaching strong technical levels.

OIL- Investors are in a wait and see mode

After yesterday’s oil price rally, investors are in a wait and see mode as the OPEC+’s key virtual meeting approaches. It will be crucial for the group to reach a quick agreement to mitigate against the worst-case scenario of an enduring global glut, which was the result of the failure of the previous OPEC agreement. Technically, the WTI price is moving laterally after the huge spike of volatility seen last Friday and earlier this week. A first positive signal will arrive with a clear climb above $27, even if the technical scenario is secondary today with the news from OPEC+ the real market driver.

GOLD-1% away from the one-month peak

Gold’s spot price rebounded on the support level of $1,640, thereby confirming the recent positive mode. The bullion price soared to $1,660 and we are just 1% away from the one-month peak achieved earlier this week. Despite the risk-on approach on stock markets of the last few days, investors are still confident that gold can shine further. This is particularly the case in a scenario where central banks are going to be forced to add a tremendous quantity of liquidity into the monetary system while keeping rates close to zero for a long time, as long as inflation doesn’t start to soar. Moreover, gold is also seen as an insurance in the event of further collapses on stock markets due to coronavirus.

FOREX-Positivity continues to be the prevailing sentiment

Positivity continues to be the prevailing sentiment in the financial markets, with the S&P 500 Index once again in a bull market. In the FX space however, activity has been subdued with this lack of dynamism stemming from investors being on standby ahead of important risk events later today. Chief among these is the publication of weekly American unemployment figures with the last two weeks revealing record-busting numbers of new claims. As a result, investors are buckled up in anticipation and this explains the relative steadiness in the correlation between the dollar and its peers, with the Index that measures the performance of the greenback almost flat on the day. We should expect more activity and fluctuation later in the day once these unemployment figures are published.

EUROPEAN SHARES -All European benchmarks are trading significantly higher

All European benchmarks are trading significantly higher on Tuesday, extending yesterday’s gains, as market sentiment strengthened towards risk assets such as stocks and corporate bonds. This revived risk appetite, mainly built on hopes of an easing of the COVID-19 spread, is getting stronger and stronger as new reassuring data confirm the progress we saw during the weekend. In addition, investors around the world still have in mind the unprecedented global monetary response to this crisis and know that it could significantly sustain an extended rally if the virus starts to be brought under control in most impacted economies. While the current situation may tempt some investors to “catch the rebound” by buying the dip, others may want to remain cautious and wait for more accurate corporate reports to get a better idea of the extent of the economic damage before increasing their exposure to these markets. 

The Stoxx-50 Index is being driven higher by financial shares with ING and Société Générale some of the best performers in Europe so far. The technical landscape of the Stoxx-50 Index is becoming really interesting as the price is now challenging its double resistance level (Speedline + 38.20% Fibonacci) following on from a bullish runaway gap opened up at the beginning of this week, which led to the validation of a bullish flag pattern (see attached chart). A clearing of the zone at 2,880pts is likely to extend the current rally towards 2,975pts and 3,075pts on a short-term basis.