US Close – Stocks stabilizes, Oil rebounds, Gold struggles on strong dollar and cash scramble

US stock markets are showing some signs of stabilization as hopes start to grow that progress was made in finding new virus treatments and by a boat-load of stimulus by both central banks and governments will put the global economy in position for a U-shaped recovery once the market is beyond the virus.
The tech-heavy Nasdaq is outperforming as passive investors start to scale back into heavily discounted bargains.  Volatility will likely remain in place and could see downward pressure for risky assets resume if lockdown efforts are raised and when US reaches its healthcare capacity.   
Central Banks
Central banks are going all-in.  Last night the ECB launched a 750-billion-euro program called the Pandemic Emergency Purchase Program (PEPP), practically a guarantee for the credit markets.  The ECB’s decision was well received by markets and even helped stabilize periphery bonds.  The RBA also slashed rates and unveiled a bond buying facility. 
The BOE is late to the party, but nonetheless delivered another rate cut and expanded QE.  The second emergency move by the BOE will do little to support the economy next quarter, but hopefully put it in a better place later in the year.  The British pound initially rallied following the BOE action, but has since seen the rally faded on the back of a broad stronger dollar move. 
Oil
Oil prices are recovering much of yesterday’s crash as the three-day collapse saw some bottom fishing after WTI failed to break the $20 a barrel level.  The oil rebound also extended higher after President Trump stated he would get involved in oil price war at the appropriate time.  The Trump administration is now showing signs they will try to defend the shale industry and stabilize oil prices.  The US will likely strongly consider delivering sanctions against Russia for their role in blowing up the OPEC + production agreement.   
Brent crude will struggle to recapture the $30 a barrel level as a flood of supply is about to hit the market next month and since no one can say with confidence when energy markets could start to see a return of steady demand for crude.   
Gold
Gold can’t catch a break.  Just when it seemed gold was going to join Treasuries as a favored safe-haven trade, the dollar’s relentless strength and investors continued need for cash is dragging it down.  The one lesson many gold traders learned from the Global Financial Crisis is that you have to be able to stomach huge swings.  The last 24-hours yielded additional stimulus measures from the Fed, ECB and BOE, which should clearly provide gold a springboard that will shoot prices higher once the scramble for cash eases and dollar loses its crown.  If the $1,450 an ounce level breaks for gold, we could see one last extreme selloff before long-term bulls jump back in.

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