Global equities dropped
Several key macroeconomic reports showed that the global economy could have a much harder hit in terms of decline pace due to the coronavirus pandemic and lockdown. Leading world’s economies suffer from an unprecedented jump in the unemployment rate, drop of earnings and spendings, slow-down of business activities, pick up in deflation and contraction of GDP. As a result, the fear-greed barometer turned back to the left side this past week. Equity investors and traders sold major indices off amid capital flows to safe-haven assets.
So the S&P 500 benchmark declined by -2.80%, although the weekly candlestick had quite a large downside shadow, reflecting the buy-low demand. The Dow Jones Industrial Average had a similar price action in terms of the rebound from the weekly low rate, but the pace of the contraction was larger (-3.16%). Tech-heavy NASDAQ Composite overperformed the rest of the major US benchmarks as the weekly loss was limited to -1.13%.
Japan’s Nikkei 225 index opened the trading week with a positive gap but slid back to the red zone later. The overall decline of the benchmark was registered at -0.70%. German DAX 30 (-3.59%) and French CAC 40 (-5.98%) were hit the hardest as the EU economy struggled to define a possible date to end the quarantine, while the GDP contraction was faster than expected. British FTSE 100 slipped -1.12% despite the pessimistic data in economic reports.
The US dollar gained strength
Foreign Exchange traders went long on the greenback this past week, especially versus high-risk currencies. The US dollar index measuring the world’s reserve currency’s strength surged +1.27% and closed the week near the top of the 8-week range. The long-term technical outlook remained bullish for DXY, while the breakthrough of the resistance level is on the table for the week ahead. If that happened, the index could accelerate the uptrend.
The single European currency weakened versus the US dollar on the back of sustainable supply for EUR/USD across the board. However, the most popular currency pair faced a strong support at 1.0775, and bounced back above the 1.0800 handle on Friday. The British Pound was the biggest loser among major currencies as GBP/USD breached an intermediate technical support around 1.2200 and kept plunging to 1.2100 handle on Friday evening. Further downside action might lead to the acceleration of the downtrend for the Sterling, especially in terms of cross-rates. The Japanese yen remained bounced back above 107.00 but remained in a quite tight trading range of 50 pips.
Commodity currencies were sold off this past week as fundamental events brought a disappointment in terms of the risk appetite. The Reserve Bank of New Zealand left the interest rates at the same level on Tuesday but doubled up the buy-back program for government bonds, which led to the spike in liquidity and Kiwi’s drop as the result. NZD/USD plunged -3.33% and breached the psychological round-figure mark of 0.6000 on Friday. Aussie lost the bullish retracement momentum as well. AUD/USD dropped -1.81% to 0.6414. The Loonie weakened versus the greenback as USD/CAD rallied +1.31% to 1.4110.
Emerging markets currencies followed the same trend as majors. The largest level of volatility was noted for USD/ZAR soaring to 18.59 (+1.37%). Mexican Peso declined -1.21% versus the US dollar, Russian Rouble remained flat, while Turkish Lira retraced.
Metals jumped, Oil soared
The price of Gold breached an essential technical resistance level at the highest weekly close in 8 years. XAU/USD added +2.44% to the rate, finishing the week at $1740.85 per ounce. The price of silver had a much more significant rally as XAG/USD surged +7.62% to $16.64 per ounce. Palladium price remained flat.
The Oil market picked up the bullish momentum as the refineries went back to work, emptying storage facilities. The US Crude Oil Inventories report was positive for the price of the WTI Crude contract, which soared +14.12% to $29.79 per barrel. Brent contract rallied +6.61%, closing the week above $32 per barrel for the first time in four weeks. Further recovery of the oil market is expected in the week ahead.
GBP/JPY Weekly Technical Forecast: Bearish
The British Pound neared a crucial horizontal support on weekly time frames across the board. The GBP/JPY cross rate dropped more than -2.0% or 270 pips, testing 8-week low-level at 129.87. The currency pair has finished the upside retracement and accelerated downtrend. The long-term technical sentiment is fully bearish, and if a breakthrough happened in the upcoming week, then the price action could have even more volatility.
The screenshot below shows that the Ichimoku cloud indicator is in the bearish continuation mode as the leading span extended its negative surplus, both Lines are below the cloud, and does it rate itself is headed South. The average directional index confirms the previous suggestion as the -DI line is above the +DI line, and the mainline is showing growing momentum. a fast and sensitive Stochastic RSI is nearing oversold zone, while signs of a bullish rebound are absent.
The daily chart with the same setup points to a profitable sell-signal occurred last week when the pair failed to break through mid-term resistance, reversed the trend Direction, and renewed the local bottom. The nearest support is placed and 126.77 pounds per yen and the bears will get there then the market on the next target at 124.00. The basic idea of the trading approach is to keep Holding a short position in terms of the swing strategy and add more volume on upside swings. Today Traders can wait for the pair to rebound towards short-term resistances and sell pound yen from there. The overall bias looks on the downside
WTI Crude Oil weekly technical forecast: Bullish
The price of the WTI crude oil jumped 14% last week, nearing a psychological round-figure resistance level of 30 dollars per barrel. On top of that, the Black Gold opened Monday with the bullish continuation above it. Technically speaking the oil market is still in the correction phase as several medium-term pivot points are still placed above the current price.
the weekly chart setup below shows that the price of oil reached the short term simple moving average with the period Of 13 weeks, while the SMA21 curve is still above the current price. The most important Price level is placed at 38 dollars per barrel. If the bulls were able to break it in the upcoming week, then the reversal pattern will be in place. On the other hand, the bears could attempt to take the market under control. In this case, a higher level of volatility would force prices to jump up and down throughout the trading week.
The MACD trend indicator is still in the negative zone but its histogram is nearing the zero level, while the lines are about to perform the bullish crossover. Further upside advance is required to confirm the reversal signal and continue moving prices higher. Otherwise, long shadows on the weekly candlestick might cause technical uncertainty. It is recommended to watch the price action carefully and react on intraday signals accordingly.
The daily time frame looks much more convincing in terms of the bullish continuation current prices are above both moving averages we have already performed the crossover. The MACD histogram turned green, and the lines kept moving north. That might be the case of the lagging nature of the long-term chart, so the oil market could move even faster in the coming week