Europe Update – COVID-19, Fed, Gold, Oil, Bitcoin

Investors See Light at the End of the Tunnel

There’s no stopping these markets, it seems, with Europe back in record territory on the tiniest sliver of good news in regard to the, newly-named, COVID-19.

Source – Thomson Reuters Eikon

Stock market investors are relentless, their ability to see the bull in any situation rivals only that of bitcoin enthusiasts, who can, it seems, make a bullish crypto argument for any and every newsworthy event. Yesterday saw the first deceleration in new COVID-19 cases in China, apparently a clear sign that the dawn is upon us.

While I desperately hope that this is the case, one day of fewer reported cases is not exactly cause for celebration. The last weeks have been brutal and the number of cases and death toll have accelerated at a frightening rate. It’s far too early to declare victory, but in the era of FOMO trading, investors are doing just that.

It’s now hoped that, as far as the economy is concerned, we’re just facing a bad quarter that could wipe around 1% of full year Chinese growth. I’m sure the data over the coming , weeks will enlighten us further on this but, should that turn out to be true, that seems perfectly manageable. Although companies in the country may not be so fortunate.

Powell appearance more hype than significance (famous last words)

Jerome Powell is due to speak again later today, this time in front of the Senate Banking Committee. These testimonies tend to be a lot of hype and little substance, with Chair’s reluctant to divulge anything new of significance in front of Congress. That won’t stop people following Powell’s every word for hidden meanings but they may be disappointed. This is more of a political affair typically than the major market event it could be.

Gold bulls not ready to abandon ship just yet

Gold is slowly losing its appeal as traders declare the end of COVID-19 in sight. This may be premature but stock markets are at record highs and central banks appear relatively relaxed about the whole situation. Gold continues to face major resistance on any approaches towards $1,600 so the path of least resistance may be found below, with $1,550 providing the first test for the yellow metal. Traders may not be ready to abandon ship just yet though, a couple more days of encouraging numbers from China may change that though.

Gold Daily Chart

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Oil needs more good news from China

Oil is desperately trying to muster up the strength for something more significant than a dead cat bounce but efforts have been in vain so far. Crude prices are arguably the most accurate reflection of the scale of the crisis in China, with the economic knock-on effects having direct implications for the global oil market.

The new decade hasn’t been nice to oil producers so far and with Russia reluctant to participate in the 600,000 barrel cut recommended by the Joint Technical Committee, it’s going to face upside challenges. Encouraging news from China in the coming days though may provide the bullish case it desperately craves though.

Brent Daily Chart

$11,000 the bigger test for Bitcoin

Bitcoin has broken $10,000 and is holding onto this potentially psychologically significant move in early trade. It’s been an interesting year so far for bitcoin, one in which there’s been an endless list of bullish catalysts including the re-emergence of the crypto as a safe haven, apparently. While I’m clearly not a member of this crowd, that’s irrelevant, if enough people want it to be true, the result is self-fulfilling.

While the break of $10,000 is interesting, I actually think $11,000 may pose a bigger test. This and $9,000 last summer were more significant for bitcoin so as long as these levels hold, it’s hard to get too excited. Well, until we see another safe haven leap on the back of some other completely unrelated event, of course.

Bitcoin Daily Chart

Source – Thomson Reuters Eikon

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