USD/RUB produced a parabolic move higher driven by the precipitous fall in oil prices. Such sharp moves tend to be followed sharp pullbacks before another leg higher unfold, analysts at Rabobank apprise.

Key quotes

“The USD/RUB climbers may retreat to the base camp around the 75.500 level to regain their strength. If conditions deteriorate further for them, they may have to descend further towards the 69.8181-70.842 area.”

“This should be interpreted as a tactical retracement followed by another attack to reach the top which is at around the all-time high at 85.9573.”

“This is based on a very cautious assumption that the coronavirus will last globally for up to 3 months. If severe restrictions imposed across the globe last much longer, USD/RUB could set a new record top.”

 

President Trump was looking for quick fixes and strives to reopen the economy by Easter which could lead to a deeper crash and failure to recover, according to FXStreet’s analyst Yohay Elam.

Key quotes

“The latest quick fix is saying he does not want the cure to be worse than the disease and wish to see churches fill up in Easter. The self-proclaimed ‘wartime president’ seems unprepared for a long battle.”

“It would be more than a delay in beating coronavirus and recovering, but also risks a loss of confidence. Investors would be cautious when reacting to genuine signs of improvement – from falling numbers of new deaths to the removal of lockdowns.”

“The bottom in equities could still be far. Another massive sell-off could be seen. Moreover, the recovery may be a prolonged one – no V, no U, and not even W.” 

“A secondary effect may also come from Trump’s lower chances of being reelected, pushing Wall Street further down in fear of Democrat-led regulation.”

 

New York Governor Andrew Cuomo is addressing the public. He says there are 140,000 incoming cases versus 53,000 beds and the idea is to flatten the curve while increasing the number of beds, especially those in intensive care. 

Cuomo adds that hospitalizations are doubling every 4.7 days on Tuesday against at a faster pace earlier. The apex is set to be reached in approximately 21 days. 

The total number of cases has risen by 5,146, to 30,811. The total number of ICU beds stands at 3,000 when 40,000 may be needed.

Earlier in the day, Spain reported its grimmest day yet, with 738 new deaths reaching a total of 3,434, surpassing Wuhan in China, where Covid-19 originated from. Italy is set to publish new figures shortly. 

Stocks are mixed on Wednesday after staging a massive recovery on Tuesday. The US Senate agreed on a stimulus bill worth some $2 trillion. 

German lawmakers have agreed to suspend the debt brake that limits deficit spending as part of the €750 billion stimulus package that Berlin has announced. During the euro debt crisis, Germany led the continent into austerity. 

Governments all over the world are approving measures to support the economies. The US Senate approved a package worth around $2 trillion.

EUR/USD is trading around 1.08, up on the day but off the highs. Coronavirus health figures are awaited from Italy, the European epicenter of Covid-19.

 

The fears of the stock markets exist on two levels. First is the emotional and indeed personal fear of the Coronavirus while the second set of fears are founded on economic and financial projections, according to FXStreet’s analyst Joseph Trevisani.

Key quotes

“The key to market fears is time. How long will the social and employment restrictions remain in place? How far and for how many weeks will it collapse consumer demand? No one knows the answers.”

“The greatest market fear is that the collapse in consumer spending will be so vast and so devastating to existing businesses that many will vanish with no possibility of recovery.”

“Markets will have to absorb many awful statistics in the weeks ahead as the extent of the damage is spelled out but the immediate economic calamity will matter less than the future once the market is convinced the corner has been turned in the pandemic.”

“We are back to the market’s emotional response. No matter how rational and analytical the view, no matter how convinced traders are that the virus will subside they are unlikely to fully act on those beliefs until they see proof in the medical statistics. It’s only human.”

 

The surge in gold prices to start this week has been spectacular, quickly trading back to the top of the range near $1700/oz after hitting lows near $1450/oz, strategists at TD Securities apprise.

Key quotes

“The Fed’s massive QE program and other facilities, helping quench the markets dash-for-cash, in combination with the Fiscal stimulus package valued at nearly $2T, the market is quickly discounting that the macro regime is inching ever closer towards Modern Monetary Theory.”

“CTAs were quickly whipsawed and are buying the yellow metal once again, which likely helped trigger outsized moves amid lower liquidity.”

“Platinum and palladium have also surged heavily in recent days, as a positive precious metal environment was met with a 21-day mine closure in South Africa amid virus concerns. CTAs have returning to buying palladium along with gold.”

 

US durable goods orders is a dated report but it confirms that businesses began to be more cautious mid-Q1 and it is going to be painfully clear how cautious/concerned they are as more data roll in, Jennifer Lee from BMO Economics briefs.

Key quotes

“US durable goods orders jumped 1.2% in February, while January’s 0.2% decline was erased to reflect a 0.1% gain.”

“The key core orders component, a good indication of future activity, fell 0.8% in February following a slight downward revision to January (from +1.1% to +1.0%). And this is a February report. Plenty has happened since then.”

  • Prices of the WTI trade on the defensive above $23.00.
  • Oversupply, demand concerns keep the commodity depressed.
  • The EIA reported a 1.623m barrel build during last week.

Prices of the WTI are fading the optimism seen at the beginning of the week and trade closer to the $23.00 mark per barrel.

WTI focused on price war, COVID-19, data

Following a positive start of the week, prices of the barrel of the American reference for the sweet light crude oil are grinding lower on Wednesday, as oversupply concerns plus the demand shock from the coronavirus keep weighing on traders’ sentiment.

In fact, the Russia-Saudi Arabia price war keeps prices depressed and bullish attempts capped so far, while the impact on the global economy of the fast-spreading COVID-19 keep prices under extra pressure from the demand side.

Ongoing supply/demand concerns among traders have practically ignored any benefit for crude oil prices from the recently clinched agreement between the US government, Democrats and Republicans over a $2 trillion stimulus package to fight the effects on the economy of the coronavirus pandemic.

In the calendar, the EIA’s report showed US crude oil supplies went up by 1.623M barrels during last week, adding to the previous 1.954M barrel build. In addition, supplies at Cushing increased by 0.858 barrels. Additional data from the report showed Distillates Stocks went down by 0.679 barrels and Gasoline Inventories fell by 1.537 barrel.

Late on Tuesday, the API reported a 1.250M barrel drop in US crude oil supplies during last week.

What to wait for around WTI

Crude oil prices remain under heavy pressure in a context of heightened volatility and thin liquidity. As usual in the past weeks, prices of the commodity are hurt by a combination of demand and supply side drivers coming from the ongoing (and future) impact of the coronavirus on the global economy and the unabated Saudi Arabia-Russia price war, aggravated by the palpable possibility that the Kingdom could ramp up production to a record of 12.3Mbpd as soon as in April. A potential relief to this low-prices-scenario could come in the form of a US intervention, which is expected to morph into some sort of agreement between the US, Russia and Saudi Arabia, all aimed to bring in stabilization to the oil market.

WTI significant levels

At the moment the barrel of WTI is retreating 4.13% at $23.32 and a breach of $20.08 (2020 low Mar.18) would expose $17.12 (monthly low November 2001) and finally $10.65 (monthly low December 1998). On the upside, the next resistance aligns at $28.46 (high Mar.20) seconded by $34.84 (21-day SMA) and then $36.28 (high Mar.11).

  • GBP/USD failed to capitalize on its early positive move to over one-week tops.
  • The sharp intraday fall tests a descending trend-line resistance-turned-support.

The GBP/USD pair witnessed a dramatic intraday turnaround and has now retreated nearly 250 pips from over one-week tops, set earlier this Wednesday. The pair has now dropped back to a one-week-old descending trend-line resistance break-point, which is closely followed by 100-hour SMA.

Meanwhile, technical indicators on hourly charts have again started drifting into the negative territory. This comes on the back of already bearish oscillators on the daily chart, which points to the emergence of some fresh selling pressure and supports prospects for the resumption of the prior bearish trend.

Some follow-through weakness below the 1.1700 round-figure mark will reinforce the negative outlook and accelerate the fall further towards testing the next support near mid-1.1600s. The downward trajectory could further get extended and turn the pair vulnerable to break below the 1.1600 round-figure mark.

On the flip side, the 1.1800 mark now seems to act as immediate support, above which the pair might head towards testing the 1.1860-65 supply zone. Any subsequent strength might negate any bearish bias and prompt some aggressive short-covering move, lifting the pair back beyond the 1.1900 mark.

GBP/USD 1-hourly chart

fxsoriginal

Technical levels to watch

 

  • US Dollar Index struggles to hold above 101.50.
  • WTI steadies above $23 ahead of EIA data. 
  • Durable Goods Orders in US increased unexpectedly in February.

The USD/CAD pair failed to hold above the 1.4400 mark and fell sharply in the early trading hours of the American session on Wednesday. As of writing, the pair was trading at 1.4322, erasing 0.95% on a daily basis.

Earlier in the day, the bearish pressure surrounding crude oil prices made it difficult for the CAD to gather strength against the greenback and allowed the pair to push higher. However, with the barrel of West Texas Intermediate (WTI) finding support near the $23 handle and recovering a small portion of its losses, the pair started to react to the USD weakness.

Later in the session, the Energy Information Administration’s (EIA) weekly US Crude Oil Stocks Change data will be watched closely by oil traders. 

USD selloff weighs on the pair

After erasing 0.7% on Tuesday, the US Dollar Index (DXY) edged lower on Wednesday as investors cheered the confirmation of the $2 trillion US stimulus deal.

Although the DXY pulled away from the 101 handle tested during the European trading hours, it struggled to extend its rebound beyond 101.50 and was last down 0.35% on the day at 101.42. The data published by the US Census Bureau on Wednesday showed that Durable Goods Orders increased by 1.2% in February to beat the market expectation for a decline of 0.8% but failed to trigger a market reaction.

Technical levels to watch for