Forex Today: Risk-Off Tightens Grip

Adam Lemon

A world recession or possibly even depression from the pandemic appears to be inevitable, with Goldman Sachs forecasting a 34% drop in U.S. Q2 annualized GDP

  • The price of crude oil continues its consolidation just above $25 per barrel.
  • The price of gold continues its multi-week consolidation pattern at about $1,700 per ounce, pending a potential breakout.
  • Stock markets fell again yesterday, with the S&P 500 Index again failing to break up past its 61.8% Fibonacci retracement level. U.S. indices have regained almost 60% of their losses, which is technically significant as an inflection point. Many market analysts think the bottom of this bear market has already been reached, but other analysts see further strong falls likely in stocks over the coming weeks and months. There is a strong divergence of opinion.

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Oil prices are making great trade opportunities

  • The rate of increase globally in new confirmed infections and deaths from the coronavirus pandemic seems to have peaked, at least for a first wave, although this may be at least partially due to the pandemic moving into South American countries which tend to have worse reporting systems. The number of daily new cases globally has arguably not declined significantly. Total reported deaths globally have been falling since April 18th and daily new confirmed cases since April 24th. Total confirmed new cases stand at more than 4.2 million with an average case fatality rate of 6.85%. The pandemic’s epicenter is still located in the U.S.A., increasingly more so outside than inside New York, but it seems as if the peak of this wave has probably already been reached there, while this looks more certain also for every European nation. However, new cases seem to be plateauing, not really falling significantly, in both the U.S.A. and the U.K.
  • A world recession or possibly even depression from the pandemic appears to be inevitable, with Goldman Sachs forecasting a 34% drop in U.S. Q2 annualized GDP and other analysts seeing a 30% unemployment rate in the near future. If correct, these will be the worst such numbers seen since the 1930s, but it should be noted many analysts continue to see a much better outlook for U.S. unemployment. The WTO has forecasted that global trade is set to fall by one third. The U.S. now sees an unemployment rate of 15% and a drop in 1st Q GDP of 4.8%.
  • Data from New York City suggests that 0.24% of the entire population of the city has recently died while infected with the coronavirus, which is one of the strongest pieces of hard evidence that the disease has a significantly higher mortality rate than any common flu. Similar data from Bergamo, Italy suggests an estimate of between 0.20% to 0.50%, indicating that claims of coronavirus having a significantly lower IFR are unlikely to be accurate. With recent antibody tests suggesting 21% of the city has been infected, this suggests an infection fatality rate of almost 1%.
  • The U.K., France, Italy, and some other nations (mostly in Europe) have begun to ease restrictions as it becomes clear the first wave’s peak has passed. The countries which seem to have suffered least from this first wave are New Zealand (which is close to having eliminated the disease completely), Australia, Norway, Austria, Greece, and Israel.
  • The rate of new coronavirus infections appears to be increasing most quickly in Russia, Brazil, and India. Russia now has the second highest number of confirmed cases globally.
  • While the vast majority of confirmed coronavirus cases are still in Europe and the U.S.A., with the U.S.A. accounting for approximately one third of all cases, infections are beginning to increase dramatically in South America, which is now accounting for almost one quarter of global deaths. The situation is especially bad in Brazil which is now confirming more than 5,000 new cases and 800 deaths daily. The President of Brazil Jair Bolsonaro, who compares coronavirus to the flu, has issued decrees trying to reopen the country which are being ignored by state governors.
  • Forex markets are dominated by relative strength in the Japanese Yen and the U.S. Dollar, while the British Pound looks like the weakest currency today.
Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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