European Wrap – COVID, Oil, Gold, Bitcoin

Too soon to celebrate?

Stock markets pulled back on Monday as reports of second waves of the coronavirus appeared to unnerve investors.

Of course, it’s early in the week and there was relatively little else happening which always makes me trust the moves a little less but a second wave in China, South Korea and Germany could be a huge deal. This entire rebound has been predicated on two things, enormous monetary and fiscal stimulus, and the anticipated emergence from the lockdown. This would be a real blow just as many countries are starting to lift restrictions.

Let’s see how the next few days go. It’s easy to get carried away with a single day’s moves. It may become clear over the coming days that investors are willing to turn a blind eye for now, with rising numbers of cases an inevitable cost of lifting lockdown restrictions. While it may slow to easing of restrictions, as long as it doesn’t reverse them, it may not cause too much of a wobble.

Slow start to the week for oil

Oil prices are slightly lower on the day but in the grand scheme of things, these moves are quite small. It’s been an impressive bounce and prices have since gone into consolidation. Of course, there’s a little over a week until the June contract expiry and the action last month didn’t start until a day before so we may have to wait a little for the real excitement, should we get it at all this month.

As it was, in gold

Gold is almost exactly where it was six hours ago when I was last writing about it. Not much has changed for weeks as far as the yellow metal is concerned, it’s very much in consolidation mode around the $1,700 level, although the range does seem to be tightening. The dollar has been a major barrier for a burst higher but should confidence rise as economeis reopen, it may not be too big a hindrance for much longer.

Bitcoin’s anticlimax

The bitcoin halving event may have given prices a nice lift in the weeks running upto the day itself but, as is so often the case with these things, the day itself proves to be an anticlimax. Buy the rumour, sell the fact is a phrase all-too-often used in the markets but on days like today, you realise why. Now the test is maintaining the gains its made once the hype as passed, a break of $8,000 would make me nervous.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam