The global markets were injected with violent bursts of volatility this trading week following the string of crucial central bank meetings which heightened risk aversion and left anxious investors on the edge. Erratic movements were viewed across the board with Asian equities meandering between losses and gains as renewed fears over China’s growth coupled with Japan’s negative rate stance encourage investors to flee from riskier assets.
These elevated concerns from Asia punished European stocks that were already under immense pressure from an appreciating Euro and ongoing anxieties towards the European Central banks inability to jumpstart Eurozone growth. On the plus side, American markets received a welcome boost from the dovish FOMC statement which slashed expectations of four US rate rises amid the ongoing global turmoil.
Although the over-extended rally in oil prices may have attributed to the stock market bull run this week, the fundamentals which have left global stocks depressed still remain unchanged. We must remember that China continues to produce dismal economic data which only reinforces the concerns over its economic slowdown while Japan is engaged in a losing battle with falling inflation. The Federal Reserve was dragged back down to reality and forced to slash inflation expectations while as expected the Bank of England remained on the fence citing external pressures as a barrier for further rate rises. With this horrible cocktail of fading conviction towards the global economy and central banks showing signs of fear towards the current unstable financial landscape, stock markets may be poised for further declines.
WTI test $40
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WTI bulls continue to receive encouragement from the catalytic mixture of Dollar weakness and growing expectations of possible production cuts ahead of the heavily anticipated meeting in April. Regardless of recent gains, WTI still remains bearish as these speculative boosts in oil prices only temporarily overshadow the firm fundamentals of an unrelenting oversupply in the heavily saturated oil markets. OPEC and Non-OPEC members risk oil prices crashing if nothing is achieved from the meeting in April which Iran will not be part of. From a technical standpoint, WTI bears need to break back below $38 to regain some control for a further decline back down towards $30. A weekly close below $40 still suggests that bears are still in the game.
Commodity spotlight – Gold
Gold bulls were offered ample inspiration from the dovish FOMC statement which drastically weakened the Dollar and diminished expectations of further US interest rate rises in 2016. This precious metal remains bullish and the ongoing China woes, combined with the fearful approach from most central banks, should provide a foundation for bullish investors to propel prices higher in the medium term. The previous days of declines simply acted as a correction which allowed buyers to purchase at a discounted price for an incline back up towards $1280. From a technical standpoint, prices are trading above the daily 20 SMA while the MACD has crossed to the upside. Previous resistance around $1250 should act as a dynamic support for another move back to $1280.
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