A day of consolidation amid corona slowing down
The market started the week with a slight sense of optimism as the Coronavirus data begins to show some improvement, albeit not across the board.
The global numbers of deceased and affected by the virus begin to level off, mainly in Europe, within Italy and Spain, the most affected countries.
With this more hopeful sentiment, European equities experienced a high performance with rises above 4%, and later, the North American indices did the same thing, reaching the primary resistance levels.
The US assets
USA500 is approaching the 2630 zone, a level that on two previous occasions could not be exceeded and which is currently the main resistance level that needs to be overcome to make way for further rises towards the 2720 levels.
But the general sentiment in the market is not optimistic in this regard given the uncertainty that still prevails, not only in the health field but mainly in that of the economic consequences of this crisis that most analysts compare to that which occurred after a great world war.
Therefore, it will be highly unlikely that the increases will be significant.
On the first day of the week, which we can classify as correction or transition, the currencies with the highest risk sensitivity, such as the Australian Dollar or the Canadian Dollar, were bought in the market against the US Dollar; however, the North American currency was bought against the Euro and the Japanese Yen, with a neutral result in global terms for the US Dollar.
USD/JPY did not consolidate the corrective downward movement of the last hours of Friday and continued its bullish path encouraged by the better sentiment towards market risk. The pair reached the 50% Fibonacci retracement of the previous bearish leg at 109.30, as seen on the chart.
Until now the Japanese Yen is being sold in a risk-on market mood, but the opinion of most analysts is that this sentiment will be short-lived as everyone becomes aware of the magnitude of the negative effects on growth, employment and investment in the economy. An extra fundamental reason for this is the current account balance favorable to Japan with respect to the United States and to a lesser extent to Europe.
USD/JPY is required to trade below 1.0880 to break the last bullish leg and be able to head towards the next support at 1.0840.
The asset most faithfully reflecting the situation created by this crisis is GOLD; as we have commented in previous analyzes, the precious metal becomes an investment target due to the loss of value of the fiat currencies given the enormous emissions required for the Central Bank's Quantitative Easing programs.
GOLD rose above the resistance of 1640 on Monday and leaves the way clear until the highs reached in March at 1703.
The strength of the current buying flow is manifested by the fact that it is not based on prior technical reasons, such as the deliverable physical gold shortage that led to a squeeze of the future on this asset. This incident was remedied by increased production, mainly in Swiss refineries. That is why the prevailing idea of the market is that this bullish movement will be enduring over time.
By: Miguel A. Rodriguez Ruiz
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