Weekly Market Analysis: May 24 — 30, 2020
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As the mighty rise in oil continues, global indices are holding on to their recent gains. The forex market has settled into a consolidation, especially in the major pairs. Crypto gains have taken a break for now, but let’s see what happens in the week ahead.
Crypto
Seesaw Price Action
Not much happened in the crypto market last week. The most important coins saw a slight bump, followed by a slight decline, ending the week basically where it started. This includes names like Bitcoin, Ethereum, Litecoin, and Ripple. It seems like investors and traders have adopted a wait-and-see approach, especially after the recent Bitcoin halving.
Cryptos like Bitcoin, Ether, Tron, and some others, have performed well over the last two months. At the moment it seems like this trend will continue, so keep an eye on the long(buy) side.
Forex
Strength in Emerging Markets
The forex market failed to deliver much action last week. The U.S. dollar lost some ground against most other currencies, with the biggest moves seen in emerging market pairs like the USD/ZAR and the USD/MXN. The South African rand(ZAR) and Mexican peso(MXN) have benefited from improved risk sentiment regarding the COVID 19 pandemic, as numerous countries gradually move out of lockdown.
Time to Sell the Pound?
Most of the major currency pairs are trading sideways at the moment. However, the GBP/USD’s price action reveals an underlying weakness in the pound. On the other hand, commodity currencies like the Australian dollar have fared pretty well, which means that besides the GBP/USD, the GBP/AUD could also have good potential on the short(sell) side.
Stock Indices
Global Indices are Holding Steady
The S&P 500 and other global indices are putting up a good fight indeed. After enduring a monumental decline during February and March, global indices have popped sharply higher. Price action has leveled out over the last couple of weeks but continued good news about the world beating COVID 19 could produce more upside in the near-term.
Energy
WTI Crude is Printing a Mighty “V” Reversal
The best trading opportunity over the course of the last month or so was undoubtedly on WTI crude oil (West Texas Intermediate). On 21 April, WTI crashed from $23.414 to a memorable $8.465, closing at 14.156 on that same day. At the moment, the price is $33.674, which means that it has gained almost 300% since it traded at $8.465.
WTI crude oil has by no means lost any of its upward momentum. Of course, Brent crude has also performed quite well during the last couple of weeks. We have to remain bullish on these two instruments as long as the momentum points higher.
Precious Metals
At about $1735, the gold price is really high at the moment. In the absence of impulsive and persistent selling, however, our bias remains bullish for now.
Conclusion
Much of the COVID-related market volatility has dissipated by now. The (major) forex market is clearly not in a hurry to go anywhere; neither are the index and crypto markets. In the week ahead, the markets could take some cues from further COVID-developments, as well as trade tensions between the U.S. and China.
