Finally, Tuesday has become a positive day in the markets. Investors have not seen the end of the bearish trend for a long time. For several days now we have been witnessing the stabilization of markets and this is very good. The released macroeconomic data on China’s business activity index turned out to be higher than predicted, which is a good sign for a possible start of growth.
Chart of the day S&P500
The struggle against the coronavirus continues. Therefore it is worth paying attention to some important assets. Demand for U.S. bonds remains. The interest rate on 10-year US-Treasury remains below 0.7%. Oil is trying to recover from phone talks between US and Russian leaders about the situation on the energy market. Gold trades without any pronounced dynamics. It follows that there is still an appetite for risk. One can expect an attempt to consolidate the S&P500 index above 2600 points.
The pressure on the Euro is increasing. After the release of the EU Consumer Price Index data, we saw the inflation rate drop to 0.7% compared to 1.2% in February. We can assume that if the current dynamics are maintained, the inflation rate may move into the negative zone at all, which will force the ECB to apply even greater measures to stimulate consumer demand. It is also possible to assume that in the second quarter due to quarantine the economy of Eurozone will slide by 12% of GDP, which looks very bad for Euro against the background of strengthening dollar. In the current situation we should consider only sales of EUR/USD pair.
The British pound behaves well in the current situation and gives great hope to investors. According to some reports, the epidemic in the UK is slowing down and, perhaps, due to the measures introduced by the government, the economy will be able to recover earlier. The second plus is that the government can print pounds as much as it really needs to stimulate. This has a positive effect, too. So far, the GBP/USD pair is trading above the SMA 50 and 100 and keeping the bullish trend. The key support level is 1.2340 and the resistance is 1.2460.
On Tuesday, there was a slight downward correction in gold from Monday’s highs. One of the reasons is profit taking due to the end of the 1st quarter. In the coming days we should expect the end of this correction and resumption of the uptrend to the level of 1690 – February highs. Still, gold has much more room for maneuvers. Any tightening of quarantine measures or another injection from the US Federal Reserve will only increase the value of the precious metal.
What’s waiting for us today?
01.50 Large Producer Activity Index in Japan
09.55 Business activity index for the German manufacturing sector
14.15 Change in the number of non-agricultural employment in the United States
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