Weekly Market Analysis: July 5–11, 2020
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Highlights:
- The crypto slump continues.
- Commodity currencies are performing well.
- The Mexican peso had a good comeback last week.
- Stocks and indices are doing better than expected.
- Oil prices are keeping up well.
- The gold bull trend is still intact.
Crypto
It has been a very quiet week for cryptocurrencies, with mostly sideways price action. However, some cryptocurrencies are notably weaker than others.
Examples of relatively weak cryptos include:
- Dash
- Litecoin
- EOS
Some of the relatively stronger cryptos this week include:
- Bitcoin
- Ethereum
- OmiseGo
- ZCash
Forex
Two currencies that performed well last week, are the New Zealand dollar and the Canadian dollar. As you may know, these currencies are also called commodity currencies because of Canada and New Zealand’s strong involvement in commodity production (crude oil and agricultural products, respectively).
Of course, a rising oil price benefits the Canadian dollar, which is one of the reasons why it had a good week last week. If oil prices continue to rise and the U.S. dollar remains under pressure, we could see a further decline in the USD/CAD during the next week or two.
The Mexican peso hammered the U.S. dollar last week. This came after it had weakened against the dollar for three consecutive weeks. Of course, the peso also benefits when oil trades higher, so the peso’s good performance is no surprise. (Like Canada, Mexico is also an important oil producer.)
Stock Indices
Investors don’t seem to be disheartened by the Covid-19 pandemic or any other economic threat right now. The S&P 500 and some other stock indices fared well last week. Some of the best performers are the S&P 500 and the German Dax (GER30).
Across the board, risk sentiment is quite good. This causes investors to move money out of safe-haven assets and into riskier assets with better yields. For example, money could be removed from an investment in the Japanese yen to an investment in the stock market.
Energy
WTI crude and Brent crude are trading sideways in a wedge pattern. The preceding market direction was bullish, so perhaps we will see a continuation of that move with an upward break out of that wedge.
Global oil demand is predicted to experience a gradual recovery between now and 2023. If Opec and its ‘partners’ manage to keep the brakes on their oil production, oil prices could see some more upside in the months to come.
Precious Metals
Gold is doing really good at the moment, despite upbeat investor sentiment. Stock markets and gold often move in opposite directions but during the last 14 weeks, they have both traded higher.
Gold seems to be quite expensive at the moment and traders should not be amazed if the price experienced a $50 — $100 dip sometime soon.
For now, the uptrend is firmly intact, so we have to remain bullish, albeit with caution.
Conclusion
Risk sentiment is relatively good at the moment. Wise investors know that the world (and the global economy) will eventually overcome the Covid-19 pandemic, and are trying to position themselves in the best way to take advantage thereof.
As we move into the week ahead, commodity currencies and stock indices are likely to perform well, while the U.S. dollar will probably remain under pressure. Gold and oil are bullish but face some resistance at the current price levels.
