Fear still dominates markets, as well as the number of problems

11 mar 2020

Dynamics of different assets yesterday can be perceived as an attempt by the markets to exhale: prices for gold and Japanese yen declined, the oil was rising. But do not treat it as everything is OK now.

The current fundamental background remains extremely negative with a downward trend. The problems of Italy (the general lockdown in the country with all the ensuing losses for the economy) so far look like the beginning of a series of problems. Next in line are Germany and France. That is, the epidemic is hitting the heart of the Eurozone economy.

In this light, we focus the attention of our readers on the advisability of selling the euro on all fronts. Yesterday's decline in the EURUSD pair has already made it possible to earn about 200 points to those readers who listen to our recommendations, but this is far from the end.

In general, events continue to evolve. The Fear Index (VIX) at its highest levels since 2008 indicates how serious everything is.

What can make a difference? First of all, incentives from leading countries. For example, the probability that the Fed will reduce the rate by another 0.75% next week is 84%. Trump announced the adoption of extraordinary measures to support the country's economy as well.

This is all good, but in the final bill, you have to pay for everything. Who will pay for all these beautiful measures? In general, it is clear - public debt. US debt is already bloated to indecent. And a good way out of the situation is not yet visible.

So we continue to sell in the stock markets, sell commodity currencies and emerging currencies, we sell euros. We continue to work with a pair of positions buying gold / buying USDJPY.

In the oil market, meanwhile, there is a strong backstage fight. The most likely outcome, in our opinion, is that the parties (OPEC and Russia) will find a compromise. The only question is when. The answer to it is not obvious, but when such news appears, oil will give the same 30%, but in upward direction. So, strategically, oil can start to be bought already near $ 30 (WTI) with additions near $ 25. But tactically, of course, the downward pressure will dominate until the situation is resolved.