US Open – No one wants to buy the dip, Lower oil prices are here to stay, Global stimulus to send gold to record highs

Stock markets in freefall and it seems unlikely central banks and governments in the short-term can do anything.  Technical selling is getting ugly and even though expectations are high the Fed will take rates to the zero bound, the retail investor will likely want to wait this one out.  It seems the collapse with oil prices have added a log to the deflationary fire the Fed will try to extinguish.  Virus fears, deflationary risks, and growing stress in the credit markets, means markets will see the Fed launch a new QE program very soon.     

Eventually investors will start scaling back into stocks, but it seems the technical selling can remain ugly for a couple more days.  The longer-term playbook will likely to buy stocks again as markets will move beyond the virus, adjust to lower oil prices, and expect a wrath of global stimulus likely to remain in place over the next year.     

Oil

Saudi Arabia and Russia basically said ‘enough is enough’ to US shale.  After crashing 10% on Friday, West Texas Intermediate crude is down around 20% today as energy markets begin to price in life with out the OPEC + production cuts and the race for market share.  Saudi Arabia’s pricing move over the weekend signaled they are going after market share and all signs suggest they will ramp up production quickly to over 10 million barrels a day in April and possibly another 2 million in the short-term.

Oil prices should remain heavy in the short-term and energy traders should not be surprise if they see prices drop another 20-40% over the next couple weeks. Oil has rebounded several dollars from the overnight low, but that will likely get faded.

Gold

This weekend’s fireworks took gold tentatively above $1,700 an ounce, but the scramble for cash have investors closing out short-term bets.  Gold is somewhat struggling to do much of anything as US stocks trigger circuit breakers.  Once we start to see some normal trading, gold should continue to climb higher.  Wall Street is about to see an emergency wave of global stimulus and gold prices will likely shine all the way to record territory.    

Bitcoin

Bitcoin is getting punished as investors are scrambling for cash. Bitcoin could see some support around the $6,500 level, but if that breaks, it will get even uglier.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya