Global equities retraced
Most of the major stock indices failed to maintain the bullish momentum and halted the recent recovery, especially at the beginning of the trading week. Global traders and investors manage to withstand the flow of negative macroeconomic reports from leading countries. However, there was an extraordinary event for the financial markets on Monday. The thing was that the price for oil futures contracts with expiration in May plunged into the negative territory for the first time in history. That caused another flow of pessimistic selling of high-yield assets and equities dropped around the globe. Although the US stock indices charted an impressive U-turn at the end of the trading week, regaining the most part of mid-week losses, the overall result was negative for the rest of the global equities.
The S&P 500 benchmark had a long downside shadow of the weekly candlestick, testing the previous resistance (now support) level at 2726.9 points. However, the overall loss did not exceed -1.40% and the index closed Friday at 2837.6 points. NASDAQ Composite overperformed the rest of the major indices and lost only -0.46%, even though the weekly candle had a similar whipsaw below. The Dow Jones Industrial Average was hit the hardest as the total cost of 30 blue-chip companies dropped -1.93% last week.
The Japanese Nikkei 225 index suffered from the bearish gap last weekend and continued falling throughout the week. There is a concern among equity traders that the pandemic might have a delayed reaction for the local economy with the worst to come. So the index was among the weakest stock indices around the world (-3.19%). German DAX and French CAC 40 struggled from the selling pressure, but the pace of the sell-off was not that huge as European major indices lost -2.73% and -2.35% of their value this past week. British FTSE 100 slid -0.42%.
The US dollar index climbed
The Foreign Exchange market was not impacted by the processes happening in the oil market and the volatility level continued to be quite modest, compared to the three-weeks turmoil in March this year. The US dollar index measuring the greenback’s strength versus the volume-weighted basket of six major currencies kept climbing slowly but surely (+0.58% to 100.29 points). That was the third weekly close above the psychological level of 100 points since April 2017, which underlines the market players’ intention to keep the index trading above it this year.
Most of the major currencies weakened versus the US dollar with an exception of the Japanese yen (USD/JPY -0.04%) and the Australian dollar (AUD/USD +0.42%). That divergence was mainly related to the local situation of both economies rather than the overall trend across the board. The upcoming week will be crucial for these currencies in the scope of macroeconomic data and central banks’ meetings and rate decisions.
The most popular currency pair was vulnerable to the selling pressure, although the pace of the decline eased. EUR/USD slid -0.47% to 1.0823 but recovered most of the mid-week losses (the weekly low rate at 1.0727). Currency traders are expecting two crucial events to happen this upcoming week before determining the trend direction in the near term. The US Federal Reserve and the European Central Bank will have rate decisions and press-conference on Wednesday and Thursday, respectively, so a high level of volatility is expected for EUR/USD next week.
The British Pound was among the weakest major currencies as GBP/USD lost -1.09% of the exchange rate this past week. After a failed attempt to reverse the downtrend and breach the resistance of 1.2600 dollars per pound, the pair dropped down to 1.2248 and closed the week at 1.2365. Further selling pressure might be in place for Sterling.
The Canadian dollar is still holding well, despite the plunge in the oil market. The USD/CAD currency pair surged to 1.4265 last week, but the bears managed to reverse the price action, finishing the trading week at 1.4100. Emerging markets currencies suffered from the risk-off sentiment to a much more extent. For instance, USD/MXN soared +5.32%, closing the week slightly below the psychological round-figure resistance of 25 pesos per dollar. USD/ZAR climbed +1.45% and charted the highest weekly close rate ever (19.0658). USD/RUB remained almost flat after the bullish rally towards 78.0000 on the back of plunging price of oil.
Gold soared, oil plunged
The price of gold surged on the back of the demand for safe-havens last week. The yellow metal charted the highest weekly close price of $1725.32 per ounce since November 2012. Most of the analysts suggest that the upcoming Federal Reserve’s meeting might force global central banks to keep pumping additional liquidity into the financial system, which would force investors and traders buying even more gold. So this week might be extremely volatile for precious metals in general and gold in particular. The price of silver remained flat, while Palladium dropped -6.31% on risk aversion.
The situation in the oil market deserves a separate long-read article as the events were unprecedented this past week. The weekly timeframe looks like a nightmare for oil traders. The spot oil price, which is more of a technical (forward) price attached to a combination of futures contracts with different expiration periods, zeroed last week. Although there was a quick and sharp rebound, the overall technical outlook remained negative for the price of oil. WTI Crude was trading at $17.31 (-6.09%) on Friday in the United States, while Brent Crude closed the week at $21.98 per barrel, plunging for more than -22%.
GBP/JPY Weekly technical forecast: Bearish
The GBP/JPY cross-rate was one of the most attractive currency pairs to trade last week. Although the range was quite limited and the pair declined by only 150 pips, the technical outlook is attractive to keep holding short positions or even open new ones. One of the key reasons for that is the lack of any bullish progress after the pair bottomed out in mid-March. The exchange rate recovered most of the previous losses during the four-weeks turmoil, but the technical analysis shows that it was not enough to reverse the downtrend.
The weekly chart setup below points to strong resistance at 134.98 yens per pound as the Fibonacci Retracement Levels tool has the 61.8% mark there. The red arrow on the price chart underlines the bearish reversal signal as the bullish momentum was exhausted. The 13-weeks Relative Strength Index has a similar pattern as the oscillator failed to test the middle threshold dividing the bullish and bearish momentum. On top of that, the RSI line kept sliding as the result of two bearish candles.
The current rate is placed quite far below the 13-weeks Simple Moving Average, which represents the descending resistance curve. The MACD trend indicator is bearish as its histogram keeps drawing bars in the red. Moreover, the MACD lines crossed the zero level from above and continued moving south.
The daily chart setup below is bearish as well. GBP/JPY is trading in a sideways range between the Ichimoku Conversion (resistance) and Base (support) lines. The consolidation phase helped the pair to enter the cloud, which kept the upper band at the same horizontal level. Meantime, the leading span and the surplus between the ADX lines are negative. However, there are two concerns for short-sellers. The first one is that the momentum is quite weak and the trading range is tight. That might help the bulls to keep the defensive barrier at 131.09 unbreached. Second, the fast and sensitive Stochastic RSI is about to perform the bullish crossover in the oversold zone, which might lead to a bullish whipsaw. Nevertheless, short positions are preferred, given the overall technical sentiment.
Gold weekly technical forecast: Bullish
The price of gold is in a sustainable uptrend, breaking 8-year records above $1700 per ounce. The highest daily close was registered last Thursday when the yellow metal closed the day at $1730.05. Although gold retraced on Friday, there is a high likelihood of a bullish continuation in the week ahead.
The Ichimoku Cloud trend indicator is totally bullish with all of the lines placed in the correct order to proceed with the buying pressure. The Conversion line acts as the nearest support curve, highlighting attractive levels to add more longs. The upcoming week could be more volatile, given the importance of fundamental events, so traders should consider using the buy-lows trading strategy with a potentially deeper bearish rebound towards $1700 and $1680 in extension.
The Average Directional Index is bullish, while the momentum is still growing, which leaves the room for more achievements on the upside. Stochastic RSI performed the bullish crossover and headed north, which adds chances for a bullish continuation in the week ahead.