May 122020

The market right now is running out of leads as to where it wants to go. All fundamental reasons has more or less come out and it’s a matter of time that these reasons gel up to be a strong catalyst for the next move.

The prospects of a risk-off scenario would be:
1. US-China Trade War tensions, which has started to form shape. China hasn’t been able to able to purchase the agreed amount of goods from US. While US says that they are not interested to renegotiate the deal. Further escalation of this and we might see a risk-off scenario in the market.
2. COVID-19 Source blame game started with US pointing the finger at China’s inability to secure the virus in their lab. While China points at the US for bringing the virus to Wuhan last October through the Military World Games.
3. Wave 2 COVID-19 pandemic.

On the flip-side, the market is waiting for 1 key event this week. FED Chairman Powell will be speaking tomorrow night 9PM (GMT+8). The tone of his language will most likely trigger the next move in the markets. He will most likely address the impact of COVID-19 which is already digested by the market and would most likely add that the FED will always be ready to inject stimulus when it needed be. The injection of stimulus would most likely be the trigger for a risk-on scenario.

In a risk-on scenario, here are the possibilities:
1. Equities will move up. DJIA might just revisit 25,200ish level where a gap remains to be closed. It is also the 61.8% retracement from the low.
Screen Shot 2020-05-12 at 23.52.25

2. Gold will move up. Any prospects of flooding the market with liquidity tends to depreciate currency value that will cause gold to be the choice of investment.
Screen Shot 2020-05-12 at 23.52.59

3. USD will be stronger than Yen because Yen is a not favourable risk-off currency.
Screen Shot 2020-05-12 at 23.53.26

4. AUD, NZD and CAD will have a grand day moving up.

Remember, the market has its own divine way of creating a trap for buyers. This could just be it as the prospects for fear may begin to tilt to its favour.

Trader H

TraderH is a foreign currencies trader and a former Certified Securities Representative in the Philippine equities market. All posts herein are personal views and are not endorsed by any organization whatsoever. It is important that you practice due diligence in your trade plans. This website and its authors will not be held responsible nor liable to any of the reader's losses.

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