Tiomarkets Daily Commentary 17 March 2020
2 weeks ago I wrote my last commentary before embarking on a trip to the UK to address some family issues. My last opening comment was ‘today is the day markets got serious about Coronavirus’. In just 2 weeks we now have a global pandemic, borders sealed, economies nose diving, people the world over being isolated. And its now Covid-19. In just 2 weeks! Trying to make sense of markets and commentate on the madness is challenging. Looking at technicals almost pointless. But I will attempt to provide some clarity where I can and some words of wisdom where necessary.
Monday was brutal. 1987 all over again. During Asian trading US futures hit the 5% limit up. Could the markets sustain a pullback after such carnage? Initially no. The first 15 mins of US equity trading saw all those gains evaporate and then some. But of course that’s not a new phenomenon. However things did turn positive and with rumors of a potential 1 Trillion USD stimulus package in the US, equities close on their highs with the DJ up over 1,000 points. In FX the directionless chop continues. EURUSD dropped from 1.1190 to 1.0955 before ending the day just above 1.1000. USDJPY spent most of the day rallying, climbing from 106.20 to 107.85 before closing nearer 107.55. XAU used to be the safe haven of choice and when I say used to be, I’m talking 2 weeks ago! Now its driven by whatever traders need to do to fund other positions. Initially we drop from 1,520 to 1,466 but as the day got brighter, we end up rallying back as high as 1,550 before closing at 1.535. What happens next is anyone’s guess. It feels like it has to get a lot worse before it gets better on the ground. How much that translates into FX and equity markets remains to be seen.
I’ll be honest and say in times of unprecedented volatility I’m not sure how much significance charts play. Anything short term I would say is almost irrelevant as its a market driven by what has to be done rather than what wants to be done. So what do I have for you? A weekly AUDUSD chart stretching back to the financial crisis (2008). At that time the 0.6000 level never broke. Today we dropped as low as 0.5960 before rallying back to 0.6010. If AUD is a bellwether for the severity of the crisis in front of us, then in the space of a couple of weeks we have exceed the financial crisis of 2008. What that means going forward…..well lets just hope its not as bad as we fear. Stay safe my friends.