The US government announced an unprecedented bailout to support the economy from collapsing this past week. After the vote in Congress passed and the market players were convinced that an incredible $2.2 trillion will be injected into the system, traders and investors in the stock market rushed to buy equities around the globe. This huge wave of optimism swallowed even the news from the US labour market that reported more than 3 million initial jobless claims in the previous week. Major stock indices found (at least) a local bottom and started recovering with the same speed they plunged for five previous weeks.
So the S&P 500 index kept falling on Monday (-3.09%) with a long upper shadow on the daily candlestick. After the announcement of supportive measures by the US, the index had a three-days bullish rally with the largest daily gain of +10.10% on Wednesday. Despite the bearish retracement on Friday, the weekly result of trading exceeded +10.20% or +236.1 points, which never happened in decades. Tech-heavy NASDAQ Composite surged +9.02%, while the Dow Jones Industrial Average soared +12.71% this past week.
Overseas indices had similar performance but a different pace. For instance, Japanese Nikkei 225 jumped incredibly +17.14% in one single week. It would be tough to find so many years with a similar pace of growth on a yearly basis, while this week brought such price action. German DAX 30 and French CAC 40 surged +7.88% and +7.48%, respectively. Even British FTSE 100 recovered part of its recent losses, rallying by +8.35%.
The US dollar index plunged
One of the purposes for the US Federal Reserve was to stop the recent panic buying of the US dollar across the globe, and they managed to cause the appropriate impact. After a huge bullish rally of +3.30% in the previous week, the US dollar index dropped -3.57% this past week, erasing all of the gains. The enormous level of liquidity supported by the US Treasury and the injection of $2.2 trillion in the financial sector helped Forex traders to ease the demand for the greenback, while most of the major currencies stopped plunged and reversed the price action.
The single European currency started the trading week near multi-year lows at 1.0636 on Monday but reversed and soared +4.16% or 445 pips (four-digit quotes) versus the US dollar. All of the five daily candles of the previous week were in the green as EUR/USD closed the week at 1.1142. The British pound had an impressive recovery as well. After falling to the lowest rate in many years (1.1450), GBP/USD skyrocketed +6.93% or 807 pips to 1.2457 this past week, counting from the weekly open rate at 1.1649. As a result, the Sterling recovered more than half of the previous two-weeks plunge. The Swiss Franc gained strength versus the greenback as currency traders were selling the USD/CHF currency pair after it failed to breached the round-figure resistance at 0.9900. The decline reached -3.5% or 344 pips and the pair closed Friday at 0.9510.
The enormous volatility was noticed for Japanese yen’s crosses. USD/JPY plunged -2.51% or 277 pips after retesting 12-month high at the beginning of the past trading week. Such a price action prevented other cross-rates from soaring as major currencies were recovering after the recent plunge. The Aussie and Kiwi, for instance, managed to regain strength versus the greenback, adding +6% to exchange rates on average. The Canadian dollar was also in demand as USD/CAD had a trading range of more than 600 pips and breached the psychological round-figure support at 1.4000 from above, printing the weekly loss of -2.51%.
Emerging markets currencies were impacted by the sell-off of the US dollar, printing significant corrections from the previous downtrend: USD/MXN -4.35%, USD/ZAR +0.26%, USD/RUB -1.35%. However, many developing countries were still vulnerable to the huge outflow in the capital on the back of repatriation flows and run to safety.
Metals rally, oil keeps sliding
Major crude oil producers continued increasing the output, trying to win the market share by lowering the price despite the plunge in the global demand. Many analysts report that oil storage facilities are getting filled with a huge speed, while refineries do not have enough orders. As a result, prices of WTI Crude and Brent Crude oil continued sliding with a weekly performance of -6.84% to $21.80 per barrel and -0.75% to $25.03 per barrel, respectively.
The price of gold surged on the back of reports about the shortage in the physical supply. The yellow metal added +8.50% to the price of $1626.15 per ounce and headed towards 7-year high noted three weeks ago. Such strong demand for gold caused the surge in prices of other precious metals. For instance, the price of Silver soared +14.41% after a two-weeks plunge of almost 30%. But the most impressive performance was registered for the price of Palladium, which skyrocketed incredibly +37.30%.
EUR/USD weekly technical forecast: Bullish
The most heavy-volume currency pair in the Forex market - EUR/USD - struggles from unprecedented volatility amid uncertainty in the financial markets, while the trading performance reminds a rollercoaster with sharp up- and downswings. Most of the technical indicators are mixed in terms of predicting the future price action as they have a certain lag, while trends appear and develop extremely rapidly.
The Williams Alligator is still in the bearish eating mode, even though all lines reversed and headed north. On the other side, the bullish crossover is not yet on the table, which means that the bears could regain control in the market. The MACD trend indicator points to a bullish recovery as the histogram is growing towards the zero levels, although is still in the red. Besides, both MACD lines are about to cross each other, but the bulls need to push the rate higher to complete it. The Stochastic RSI oscillator is the only fast-moving indicator as it has a lower leg and a shorter period. Thus, both lines of the Stochastic RSI are headed north with a potential for further bullish achievements in the near future.
Given all that, a healthy bearish retracement might be required to proceed with the rally. The 50% Fibonacci retracement level comes at 1.1066, and a possible bearish rebound might be capped above that horizontal support, while a breakout from above could lead to another wave of selling pressure for EUR/USD.
Gold weekly technical forecast: Bullish
The price of gold has found a bottom in the week of March 16 with the weekly low at $1451.41. Such a deep rebound was registered after the yellow metal charted the highest price in 7 years at $1703.60 just two weeks before that. As a result, two weekly bearish candlesticks on the chart below had a total decline of -10.62% or $252.13 per ounce, and that was rather unexpected, given the recent long-term uptrend. However, the past week’s performance showed that the bearish breakout was fake, and the price of gold came back to grow much faster than some of the bears would have expected.
Technically speaking, the bearish retracement is over as sellers failed to get the price of gold inside the Ichimoku Cloud (see the long downside whipsaw on the previous weekly candle on the chart below). As far as the leading span maintained the positive surplus and both Conversion line and Baseline remained above the cloud, the overall sentiment is still bullish in the long run. Besides, gold closed the previous week above both resistance curves, which confirms the previous suggestion that the bearish breakout was false.
Other technical indicators are in favour of the bullish scenario as well. The Average Directional Index did not have the bearish crossover of its red and green lines, showing that the bullish surplus is still in play. On top of that, the ADX main line is still far above the threshold with a large potential to keep rising compared to the previous peak in September 2019. That points to the strong bullish momentum in the market. The fast and sensitive Relative Strength Index with a period of 13 weeks had a short-term rebound towards the middle range, but reversed rapidly and continued edging higher. The fact that RSI has a lot more room to go north before the overbought level shows that the price of gold should keep strengthening in the week ahead.
The nearest target is placed at the recent top above the psychological round-figure level of $1700 per ounce. However, given the depth of the past bearish retracement and the pace of growth in this past week, the real medium-term target could come much higher. We suggest that the range of $1800/1840 looks attractive to take profits from long positions based on the swing approach.