We're seeing a bit of a rebound in early European trade on Wednesday, with US futures also a little higher as markets take a breather from the recent sell-off.

It's too early to even try and associate this with any form of optimism given the events of the last week, while the size of the rebound compared to the days before gives it more an appearance of a dead cat bounce than anything else. There's been a lot to digest and I wonder whether investors are simply taking a step back and doing just that.

We've seen rate cuts overnight from the RBNZ, RBI and BoT that have all exceeded market expectations which may be helping the rebound, given investors craving for more and more monetary stimulus. It may not yet be coming from the central banks they demand it from most but the mood is clearly shifting.

 

Ideal environment for gold

The environment continues to look very favourable for gold, which is up 1% on the day again and still pushing for a breach of $1,500. It's so far found some resistance around $1,490 but doesn't appear to be lacking any support. The dollar has rebounded a little which may provide a headwind but three central banks cutting rates does it no harm.

The evolution of the trade war into a currency war has so far been largely symbolic, with China firing a warning shot with the higher currency fix and the US labeling it a currency manipulator. This could of course escalate further and encourage more aggressive tariff action and another breakdown in talks, prompting more risk-aversion in markets and adding to the bull-case for gold.

 

Oil crushed by trade war fears

Oil has been crushed by recent events and the risks posed to the global economy and therefore the demand outlook. While much of the focus in recent years has been on the supply side of the equation, there's been a very clear shift in 2019 and central banks are further fueling the slowdown narrative. Numerous inventory drawdowns recently are not providing much of a cushion for prices and if the API data on Tuesday is anything to go by, we may see a similar response today.

 

Bitcoin is no safe haven

Bitcoin has been on a good run this month so far, recovering well from its lows as scrutiny of the cryptocurrency space has eased up. There are those that want to apply safe haven status to bitcoin to explain the recent rally but these explanations are always very selective as there's numerous examples of markets being risk-off, safe havens doing well and bitcoin not. Cryptocurrencies may have many appealing qualities but their role as a safe haven given their volatility and unpredictability is certainly not one of them.

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 OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD crashes to new 2020 lows amid ECB dovishness, coronavirus fears

EUR/USD is trading below 1.1050, at the lowest since early December. ECB President Christine Lagarde refrained from acknowledging the recent economic improvement. Fears of the spread of the coronavirus are weighing on markets.

EUR/USD News

GBP/USD pressured toward 1.31 amid risk-off mood

GBP/USD is trading around 1.31, off the highs. Coronavirus headlines are sending traders to the safety of the US dollar. Speculation about the next BOE move is rife.

GBP/USD News

Top 3 Price Prediction Bitcoin, Ethereum, XRP: Set for a dive before the next big bull market

The first initiative comes from WhatsApp. Users of Facebook’s popular instant messaging application will be able to exchange Ether among themselves and other tokens that function over the ERC20 protocol.

Read more

XAU/USD bulls challenging 1573 resistance level

XAU/USD is trading in a bull trend above its main daily simple moving averages (SMAs). After rejecting the 1600 figure earlier in January, the metal has been consolidating near the $1560 per troy ounce.

Gold News

USD/JPY drops to fresh eight-day lows near 109.50

USD/JPY extends losses and trades close to an eight-day low near 109.50 in a relatively risk-off environment, with the media headlines full of the coronavirus as it spreads internationally. Bears can look to the golden ratio around mid-108s.

USD/JPY News

Forex Majors

Cryptocurrencies

Signatures