Despite a good start in the global markets this week, they quickly changed direction after renewed fears of the possible negative effects of COVID-19 on the global economy.
Economic data, which remains good and stable worldwide, fails to inspire the necessary confidence among investors. Even the idea of greater central bank intervention remains in the shadow of the growing epidemic. Despite a slight decrease in cases in China, those in the rest of the world, including deaths, are increasing.
Given the situation with the virus, we remain reserved for risk sentimentation next week. We expect the mood to remain shy about risky assets, with sentiment driven mainly by the epidemic situation.
We expect the defensive sector and safe haven havens to continue to be a harbor for investors. We suggest potentially that global stock and index sales could continue in the face of escalation with COVID-19.
On the FX front, we expect the euro to continue to win positions against the US dollar, including the pound. With the interruption of the winning USD series, we believe that its main competitors in the G-10 basket will be stronger than the US dollar. Swiss franc and yen remain preferred defensive assets among currencies.
For resources, we expect gold to lead precious metals with additional gains as long as the risk fund remains negative. We also think the oil will extend the correction.
Again, Bitcoin has the opportunity to prove that it is the preferred asset in crisis situations. However, holding him above $ 10,000 as a psychological frontier will solidify his bullish position.
It is important to note that risk sentiment can change within seconds, so trade carefully.
Trader Martin Nikolov