MARKET OUTLOOK · By March 10, the number of active cases had dropped quickly, as people recovered....

2020

MARKETOUTLOOK

Q2

MARKET OUTLOOK

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FOREX OUTLOOK

EURUSD: Soars on Coronavirus Panic

USDJPY: Roller-Coaster Ride Will Not End Anytime Soon

AUDUSD: Under Pressure on World Lockdown

GBPUSD: Trades Lower as Coronavirus Could Delay UK-EU Trade Talks

STOCK MARKETS TUMBLE AS INVESTORS PREPARE FOR THE WORST

GOLD PRICES MAY RESUME UPTREND AS QE IS EXPANDED AGGRESSIVELY

CRUDE OIL PRICES COULD RISE ON HIGH DEMAND IN Q2 AND

CORONAVIRUS RISK ABATING

CRYPTOCURRENCIES DROP AS THE SAFEHAVEN NOTION IS CRUSHED

THE MARKET ANALYSTS OF ATFX

FOREXOUTLOOK

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4MARKET OUTLOOK

At the time of writing on March 10, the EURUSD had

experienced a roller-coaster movement. By February

20, the price had slid by 461 pips and reached my Q1

one target of 1.0787. However, as the second leg of

the coronavirus spread took form and engulfed Italy

with thousands of sick people, the EURUSD bottomed

out. On March 10, the pair reached a high of 1.1496,

and had rallied by 716 pips from its 2020 low, and

reached a new 2020 high.

There are many theories as to why the v-shaped bounce

took place, and we will cover the two main ones here: the

interest rate cuts by the Federal Reserve and the funding

currency behavior of the Euro.

The Euro as funding currency

If we focus on the latter, it suggests that investors started

to hedge loans in Euros and that it lifted the EURUSD

exchange rate. The explanation is simple. It is very cheap

to borrow Euros, and since 2015 the short-term interest

rate in Europe between banks has been negative. This

means that you get paid to borrow.

In the US, the interest rate has been positive, so an

investor would borrow in Euros and invest the money

elsewhere, like in US stocks or treasuries. However, when

market volatility picks up, the volatility in the invested

asset becomes higher than the interest rate differential

between the Euro and USD. That causes investors to

hedge their loans in Euros and support EURUSD.

This can explain why the Euro moved higher, although

the center of the second coronavirus crisis is in Italy.

As Europe is taking a different approach dealing

with the virus compared with China, it is likely that

we will see more people infected in Europe and that

the coronavirus crisis will extend for much longer.

The major difference between China and Europe is

that China was quicker to quarantine their population.

It took until March 9 for Italy to close down, and at

that point, 9172 people were already infected with

the new virus. However, the decision is good, and in

the next few weeks, it should have an impact on the

number of coronavirus cases in Italy. In China, it took

about two weeks for the percentage growth rate of

new cases to the peak. Italy’s action is also opening

up the possibility for France, Germany, and Spain to

follow, and if they go ahead, it could put a halt to the

spread in Europe. It would also slow the European

economy, and this could force the ECB to act, and cause

the EURUSD to stumble.

EU tries to wait out the Coronavirus spread

With the exception of Italy, it looks like EU politicians are

treating Covid-19, as a new and slightly worse flu. They are not closing their borders or asking people to work

from home. Instead, they insist that people continue with

their lives as usual which is putting 514 million European

citizens at risk. Government officials in some countries are already saying that up to 80% of people could get

infected, and in the UK, the PM said that 1/5 of workers

could be sick at the same time. In general teams, that

means that millions of people stand to get the virus,

and if the death rate of about 3% stands, the number of

deaths could be staggering. At least, for now, the EU is not

bothering to do anything about it. Still, when the number

of fatalities picks up, it is likely that temporary borders

and harder quarantine measures will be implemented. If

the borders are closed, the Eurozone could slump into a

recession. As long as the risk remains that we could see

a worsening mood because of the virus, the Euro should

remain supported.

EURUSD: Soars on Coronavirus Panic

By Alejandro Zambrano, Global Chief Market Strategist, ATFX


5MARKET OUTLOOK

EURUSD Daily Chart

Interest rate differentials

There is also a theory that the EURUSD rallied higher

because of the 50-bps rate cut by the Federal Reserve in

early March, and there are current expectations of further

rate cuts at their March 18 meeting. However, with rate

cuts already implemented, and another one priced in,

I think it is unlikely that the Fed could do more to cause the

USD to slide unless they opt for quantitative easing.

In the case of the ECB, the outlook is different. They have

so far refused to cut rates and appear to be hoping for EU

governments to step in. However, with the Fed, Bank of

Canada, and Reserve Bank of Australia cutting interest

rates, the ECB could be pressured to act. If they do, then

this could tilt the balance in favor of the USD.

Technical outlook

From a technical point of view, the channel that I have

been working with since last summer has failed as the

price traded above the upper-downward trendline. It did,

however, predict the slide to the 2020 low before the price

took out the upper trendlines of the channel. The EURUSD

is also trading above the 200-day moving average,

currently at 1.11.

The short-term trend will remain upwards in the very

short-term and the next target could be the January

2019 high of 1.1569, fol lowed by the September

2018 high of 1.1815.

However, the RSI-14 is overbought, and as mentioned

above, the ECB might act next. Thus, I think investors

will be reluctant to chase the EURUSD at current levels.

Instead, if the EURUSD can remain below the January

2019 high, I suspect the EURUSD might seek out the

200-day-moving average at 1.11 in the next few weeks.


6MARKET OUTLOOK

As with many other Forex pairs, trading in the USDJPY

during Q1 was a roller coaster experience. I suspect

Q2 will be similar, and the outcome will depend on the

coronavirus situation.

The economic situation in Japan tends to have a low

impact on the currency until the Bank of Japan decides to

embark on large QE and rate cut programs, and in recent

years they have not altered their strategy too much. The

currency tends therefore to follow the mood of global risk

appetite. Two main indicators of this are the US-ten year

government bond yield and the Japanese stock market:

the Nikkie 225.

The ten-year government bond yield was around 1.973%

at the end of last year while stock markets were booming.

However, from the start of 2020, the yield curve started

to drift lower, and as news broke about the coronavirus in

China the yield turned aggressively lower. Then as crude

oil prices dropped by nearly 30% in one day due to Saudi

Arabia increasing production, the yield dropped hard and

reached a low of 0.3595. The lower yield on the back of

lower crude is warranted given that inflation will be lower than usual because of the sharp drop in energy prices.

However, following the strong decline on news of the

price war, the yield has stabilized.

The Nikkei 225 was also affected by the virus panic and

slowdown of China, as well as the high risk of the Japanese

Olympic games being postponed. The stock index was

down by 27.87% from its 2020 high on March 12, and

could probably add another 12.5% loss, taking the price

to the 2016 low of 14986. However, what is important

now is how much of the negative news is priced into the

stock and US government bond yield.

The drop in the bond yield is, from a technical

perspective, overdue. While the Japanese stock index

has further to go because of a large rectangle pattern

in the Nikkei 225 that formed from February 2018.

If we take a look at the current global situation, there are

governments acting decisively however most are not

doing enough to stop the spread. There I expect USDJPY

could remain under pressure.

USDJPY: Roller-Coaster Ride Will Not End Anytime Soon



7MARKET OUTLOOK

USDJPY Weekly Chart

On the weekly chart below, the USDJPY formed and

triggered a major descending triangle pattern. The

pattern is made up of the 2018 low of 104.56, a level

that the price nearly revisited in late 2018, and also

touched in 2019. In the week of March 9, the USDJPY

gapped below the support level and triggered the

pattern. However, as the week was coming to an end

it looked to be a false breakout of the pattern. The

breakout will only be confirmed if the price closes below

104.56, yet a close near to 102 would have been

better. If the price indeed closes below 104.56, the

pattern suggests that the price could reach the 95.95

level. On the way to the 95.95 level, the price would

need to breach the 2016 low at 99.47. Should the price

not close below 104.56, the breakout is considered a

false breakdown, and the price might rally to the March

high at 108.60. If the price trades above the March

high, the price might reach the 2020-high of 112.


8MARKET OUTLOOK

AUDUSD: Under Pressure on World Lockdown

The Austra l ian Dol lar has been af fected by the

Coronavirus crisis, and it offered a few easy to read

trading opportunities in the first quarter. The move lower in the currency was understandable given that about

38% of Australian exports go to China. The China PMI

release in February confirmed that the economy came to an almost complete halt due to the coronavirus breakout.

To top it off, the RBA cut interest rates on March 3.

The RBA cut interest rate by 25 basis points to 50%.

Unconventionally, the AUDUSD actually traded higher on

this news. Problems for business and limitations to travel

were cited as a reason to cut interest rates, as well as

lower employment growth and lower inflation.

Typically, a currency will decline when the central bank

reduces its interest rates. Yet the currency gained and

remained relatively unchanged since the rate cut. The

reason for this is that the rate cut was already priced in,

and the currency pair was already down close to 600

pips from December 31, 2019 high.

The situation in China has also improved. The peak in

coronavirus cases growth occurred in mid-February.

By March 10, the number of active cases had dropped

quickly, as people recovered. In Hubei, which was the

most affected region, 47,743 people have recovered,

leaving 20,017 people still affected, a drop of 70.5

percent, from the high of 67,760 cases. Even President

Xi, visited the most battered city, Wuhan, on March 10, to

show that the risk was abating. China is now pushing to

get people and workplaces back online, and this should

limit the slide in the Australian Dollar. On March 11, the

FT published an article showing that coal consumption

at China’s six largest independent power producers

was down by 30% from before the Chinese New Year.

Other indices showed that Freight logistics activity was

only 17% from the pre-holidays levels, however, traffic

congestion and subway traffic in major cities were still

operating at just 50% of its typical level.

Despite the positive signs in China. It is too early to know

what will happen in Australia because the virus on March

11 had only infected 107 people. However, the WHO

had just declared a world pandemic, and are pushing

countries to do more. As the WHO has raised the alarm, it

should encourage countries to do more to limit the spread.

If the virus spread is contained and we see numbers peak

in Europe and the US over the next few weeks, we could

see the Australian dollar receive support. If the virus is

allowed to spread it will probably just delay the inevitable

shut down of large parts of Europe and the USA.



9MARKET OUTLOOK

Technical outlook

Technically, the outlook for the Australian dollar remains

downwards as traders look for better signs in the data

that the coronavirus spread will abate. The trend is

downwards below the March 9 high of 0.6685, and if the

markets were to correct to the 0.6520 - 0.6685 range,

I suspect traders will try to use this opportunity to short-

sell the pair. As the long pair remains below the March

9 high, I suspect the price might reach the 2009 low of

0.6349, followed by the 2008 low of 0.5997. However, on

a break to the March 9 high, I suspect trades will lift the

pair to 0.68, followed by 0.69.

AUDUSD Daily Chart


10MARKET OUTLOOK

GBPUSD: Trades Lower as Coronavirus

Could Delay UK-EU Trade Talks

The GBPUSD had lost about 5% in 2020 as two and a

half weeks of trading remain in the first quarter. The British pound decline against the dollar was not unique, many

currencies lost ground from the start of the year. The GBP

didn’t gain against the Euro, which was one of the few

currencies to rally off the coronavirus spread.

The reason for the limited support to the GBP is because,

unlike the Euro, it is not a funding currency. GBPUSD saw

a big boost in Q2, 2019 when Boris Johnson was elected

PM. GBPUSD then spiked higher when the Tories got a

majority in parliament in December. It was then brought

back down to earth after the general election as the PM

made it law that the UK will leave the EU by the end of

2020, with or without a trade deal with the EU.

GBPUSD was also under pressure because of the

coronavirus outbreak. It’s close proximity to European

countries that are affected has had a knock-on effect.

On March 13, France and Spain are lagging Italy

by a week but the UK is fur ther behind, by one to

two weeks. The effect of the virus will also hurt the

US and so could have a neutral effect on GBPUSD,

it just depends on who bounces back better after

lockdown.. The ripple effect of the virus will most likely

delay and disrupt EU-UK trade deal negotiations

as the EU and UK deal with the economic fallout of

the virus. The risk for a hard Brexit will continue to

limit the buying interest in the GBPUSD. As for the

fundamentals, they remain for now with the US, as the

UK and most of Europe are growing slower than the US.

I, therefore, think the GBPUSD could remain under

pressure in Q2, 2020.



11MARKET OUTLOOK

Technical outlook

From a technical point of view, the GBPUSD is trading

within the 1.1942 to 1.3367 range, and in March the price

slid below the November 2019 low of 1.2761, opening

the door for further declines in the weeks ahead. The next

support level, as seen in the chart below, is the October

2019 low at 1.2195, however, the price is also short-term

oversold, and in a range, thus I do not think long-term

traders will be selling the pair at current levels. GBPUSD

could be forming a major inverse head and shoulders

pattern, with the 2018 low being the left shoulder,

the 2018 low being the head, and the right shoulder

possibly forming in the weeks ahead. Today, it is too early

to know what may happen with the head and shoulders

pattern, but what is clear is that the trend is downwards

below the January 31 high of 1.3209 If the price were to

bounce back to the November 2019 low at 1.2761, I suspect

that investors will see this as an opportunity to short-sell

the pair. If the price indeed turns lower following a bounce,

I suspect it could reach the October 2019 low at 1.2195,

followed by the 1.20 level.

GBPUSD Daily Chart

STOCKMARKETS


13MARKET OUTLOOK

STOCK MARKETS TUMBLE AS INVESTORS

PREPARE FOR THE WORST

Stock markets started this year in impervious fashion,

fighting off the bearish sentiment coming from armchair experts on Twitter. That was until the coronavirus hit.

The coronavirus started in Wuhan, China, where despite

the outbreak being severe, western stock markets didn’t

take much notice. In fact, after the first cases were reported in December 2019, indices continued to rally.

Stock markets began to waver as they saw China

banning people from leaving their homes and going to

work. Forcing a large portion of its workforce to stop

working resulted in reduced output and ultimately an

economic slowdown. The world is now waiting to see if

China will be able to bounce back.

Large scale stock market anxiety started once it was

clear that the virus had spread outside of China. As

Europe started to report more new cases than China, the

sell-off was exacerbated. Investors went into flight mode, buying up safe-haven bonds and dropping their stocks.

Coronavirus

The second quarter of 2020 will be determined by the

handling of the coronavirus. With global indices all

affected, investors will be looking at the speed of the

outbreak and the rate of recovery.

Governments are prepar ing and implement ing

contingency plans to combat the virus however it’s these

plans that could hurt the stock markets further. Stopping

people going to work will reduce service and product

output. The ripple effects will hit firms’ revenue and will slow the economy.

Governments will be judged by their actions to manage

the virus situation and their economies. Expectations are

that this will pass but it is the period from now until then

that will affect global stock markets.

Mark Carney described this as a ‘disruption’ rather

than a ‘destruction’, referring to the 2008 crisis. So whilst

we are seeing large losses, the expectation is still that

this will be contained and that the markets are robust

enough to cope.

Whilst it’s unlikely to see an immediate bounce back to

the highs, it’s also unlikely we’ll see investors running to

the hills like 2008.

Presidential Election

The Trump administration will be gearing up for another

(likely bitter) election campaign.

By the 6th of June, we should have a clear picture of who

is going to challenge Trump for the presidency. At the time

of writing, Joe Biden and Bernie Sanders are leading the

race for the Democratic nomination. Michael Bloomberg

was a contender who could match Trump in the

campaign financing arena but has since endorsed Biden, ending his campaign.

The Republican party, albeit smaller, is a cohesive

unit with members similarly aligned in their views and

ideologies. The Democratic party is a larger entity but

has more fractions and differences in views. Traditionally

they believe that a right-leaning candidate is needed to

beat off the Republicans.

By Cameron Bowen, ATFX UK


14MARKET OUTLOOK

The Biden resurgence appears a case of the moderates

waiting to see who was left before they put their weight

behind one candidate. The last man standing was

Joe Biden. This is the democratic party trying to avoid

Sanders as their nominee, whom they see as a socialist

unlikely to beat Trump.

Whilst Bidens come back looks good on paper, in

reality, he looks a long way off defeating Trump. He fell

flat in early state pollings, had poor performances in

debates and still hasn’t had the endorsement from his

‘best friend’, Barack Obama. The ‘last man standing’

nominee will always struggle to win an election.

With the acquittal of Trump’s impeachment trial and fairly

weak Democratic nominees, there aren’t many blockages

to derail Trump’s second term hopes.

How does this affect the stock market? Markets don’t like

uncertainty and the threat of a left-leaning president will

create questions about monetary policy. Therefore, the

closer a nominee like Sanders gets to office, the more nervous will index investors will become.

But, even with Sanders as the nominee, we’d need to

see a major shift in public opinion before stocks start to

worry. It wouldn’t be surprising to see a similar result to

the crushing defeat Jeremy Corbyn’s UK Labour party

received at the hands of the conservatives. This was

during the UK’s general election in December 2019.

US-China Trade War

We can assume, true to fashion, that any victory Trump

receives will be paraded in front of the American public.

This leads us to the US / China relations.

A truce is in play between the two superpowers, with both

able to take a victory back to their respective electorates.

Trump, the instigator of the trade war, is unlikely to be

looking for any trouble during his election campaign.

So we should expect to see indices take comfort in that

during the second quarter.

China’s victory is that it limited the risk of trade shock and

that this truce will help requirements to reduce debt levels.

Thus, boosting investor confidence.

Central Bank easing

With the plummeting stock prices due to coronavirus,

the Fed has moved quickly to make its largest cut since

the 2008 financial crisis. Other central banks are also threatening similar measures, which should encourage

spending and in theory, see stocks up.

But whether theory stands up in practice is another

question. Central bank policymakers have been saying

it for a while but now we’re hearing it from investors

and economists - there’s not a lot monetary policy can

do to boost the global economy. So it’s unlikely we’ll

see too much effect from any central bank easing,

on the real economy, however, stock market traders

tend to send stock much higher on interest rate cuts

and quantitative easing.


15MARKET OUTLOOK

The above chart shows the two largest weekly candles

in terms of monetary value the S&P has ever had. After the

initial aggressive sell-off, we saw the S&P approaching

major support levels which held on the 30 September

2019 at 2855, the 5 August 2019 at 2822 and the 3 June

2019 at 2728.

It has since blown through those support levels,

where we now have the 2018 lows of 2346 as the

next level of support.

Given the direct trajectory of this market, bias is most

certainly bearish. The short term future of this market

will ultimately come down to how the spread of the

coronavirus is handled. How long will countries be put on

lockdown and how long before they can start to get back

to the types of output we witnessed prior to the virus.

Whilst major global events like central bank easing,

the U.S Presidential election and any trade wars would

normally play a large role in stock indexes, the current

market will act on how the coronavirus is handled.

With most countries now starting to take the threat

seriously, there will likely be a period where things get

worse before it gets better. Stock indices are still very

volatile but they will be getting used to this news and

despite the expected worsening, investors can now see a

light at the end of the tunnel.

I expect to see continued volatility in the coming weeks but

I think we will see it soften. A push lower to the support of

2346 on 24 December 2018 is expected but it might not

come immediately.

S&P 500 Technical outlook

S&P 500 Weekly Chart

GOLDOUTLOOK


17MARKET OUTLOOK

The global outbreak of COVID-19 has impacted the world

economy and financial system, sending markets into turmoil, with global stock indices seeing sharp falls. As the

global economic and financial system has been hit, spot gold has climbed to $1,702.

In March last quarter, the US Dow futures gave up 32%

of its value from its 2020-high, creating the largest

monthly drop since the 2009 subprime mortgage crisis.

The panic in the financial market triggered a sharp rise in the price of US Treasuries, with yields falling to levels

last seen in the 2008/2009 financial crisis. With Treasury yields near zero, the Federal Reserve and central banks

around the world rushed to slash interest rates, and

the FED restarted quantitative easing this tends to be

supportive for gold prices.

If the global economy does not pick up in the second

quarter and panic leads to increased risk aversion, spot

gold could rise even further to a nearly eight-year high of

$1,795. However, it is important to note that the global

stock market crash might make the value of stocks

relatively more attractive to gold. In addition, people that

have been long gold for a while, might soon be interested

to book their profits. If the spot gold price is unable to break through the previous peak of $1,921, the price may

trade significantly lower.

It is expected that the pandemic of COVID-19 is to be

contained in the next quarter. If so, there will be no need

for central banks to launch more aggressive monetary

easing policies and the spot gold price could trade lower.

GOLD PRICES MAY RESUME UPTREND

AS QE IS EXPANDED AGGRESSIVELY

By Martin Lam, Chief Analyst of Asia Pacific, ATFX


18MARKET OUTLOOK

Technical outlook

According to the spot gold weekly chart, the price took

a sudden turn after it hit an all-time high of $1,921 in

September 2011, a low was then created at $1,045 in

2015. Following the low, it rebounded and climbed again

to recent highs of $1,700. With the technical indicators

like the RSI being overbought, the price of gold has

seen a reversal, and it’s expected that $1,422 will be an

important first target and support level. If it fails to breach this support level, spot gold is still expected to test the

85% of the Fibonacci retracement, a target of $1,791.

And whether the spot gold price can reach $1,921 within

or after the second quarter, will be decided by a variety of

fundamental factors. For example, the spread of the novel

coronavirus, the monetary policies of the Federal Reserve

and other major Central Banks in the world, as well as

the performance of global stock markets. If the pandemic

can be contained and the global economy recovers

steadily, Central Banks will not have to further loosen

monetary policy and global stock markets will rebound. It

is estimated that the spot gold price is expected to drop to

$1,422 after an initial test of $1,795.

XAUUSD Weekly Chart

CRUDEOIL


20MARKET OUTLOOK

At the end of last year, the United States eased trade

restrictions on China and Europe on the assumption

that it would benefit the global economy and l i ft

up crude oil prices.

However, the outburst of COVID-19 and its rampant

global spread in the start of 2020 has disrupted the global

economy and sent financial markets lower. Numbers of infections are rising fast in the United States, China, and

Europe, the three largest economies of the world and it’s

sending shockwaves through the markets.

Manufacturing and services industries worldwide have

been adversely impacted sending oil prices down by

30%. In addition, OPEC’s failure to reach an agreement

with other oil-producing countries to cut oil supply has

sent the oil prices to a five-year-low.

US oil futures fell as low as $27.6 a barrel, while Brent

Crude Oil dropped to $31.4 a barrel, not far from their

2016 lows. Seasonality analysis suggests that Crude

oil prices could rise in April and extend throughout the

second quarter, excluding adverse factors to crude oil.

If governments manage to contain the pandemic and

OPEC and other countries agree to cut output, then we

will see oil price stabilize. Should this happen I believed

that the US and Brent oil futures will rebound amid the

surge in crude oil demand.

CRUDE OIL PRICES COULD RISE ON HIGH

DEMAND IN Q2 AND CORONAVIRUS RISK ABATING

By Martin Lam, Chief Analyst of Asia Pacific, ATFX


21MARKET OUTLOOK

USOIL Weekly Chart

WTI Crude Oil

Technically, crude oil prices were forming a large inverse

head and shoulders with the March 2015 low being the

left shoulder, and the June 2017 level being the right

shoulder. However, as the price traded below the right

shoulders at $42, the pattern failed, and US oil fell sharply

to a low of $27.6, approaching the bottom of $25.87 in

2016, a 4-year low.

If the price of US oil futures break the 2016 low and

reaches $25 then it will open the door for a test of the

$15 level. On the contrary, if crude oil prices hold above

$25.87 then I expect it to retest $39.70 and potentially

trade above $51.56.


22MARKET OUTLOOK

Brent Crude Oil

For years, the Brent oil futures have moved roughly

in line with the US oil futures, this is the case again

as pr i ce was fo rming a s imi la r ly la rge inverse

head-and-shoulder that fai led.

If Brent oil futures fail to break the 2016 lows and

rebound, in turn creating a reversal formation, we can

expect to see the levels $51.56 and $54.75 tested

respectively after the current.

UKOIL Weekly Chart

CRYPTO-CURRENCIES


24MARKET OUTLOOK

CRYPTOCURRENCIES DROP AS THE

SAFEHAVEN NOTION IS CRUSHED

The f irst quar ter of 2020 star ted well for the

cryptocurrency market. But like traditional financial

m a r k e t s , i t a p p e a r s t o h a v e b e e n a f f e c t e d

by the coronavirus.

The fact that cryptocurrencies have fallen in value during

the coronavirus will disappoint many crypto enthusiasts.

There is a contingent of cryptocurrency investors that

are adamant bitcoin is turning into a safe haven asset.

However, based on the coronavirus case study, this

theory is incorrect.

The majority of the market volatility started on the 20th of

February, which saw stock markets plummet over 20%

in some instances and safe havens rally. Therefore, we’re

still in the dark as to what bitcoin actually is and how it’s

perceived by investors.

The majority of the market volatility started on the 20th of

February, which saw stock markets plummet over 20%

in some instances and safe havens rally. Therefore, we’re

still in the dark as to what bitcoin actually is and how it’s

perceived by investors.

The theory still stands that the majority of coins are held

by a handful of whales that dictate the price movements.

Bitcoin Halving

The most notable event that’s happening this quarter is

bitcoin halving for the third time.

Bitcoins are rewarded to miners who add a block of

transactions to the blockchain. Every 210,000 blocks, the

amount of bitcoins rewarded is halved. We can’t predict

the exact date this will happen but we expect it to be

during the second half of May this quarter.

There is a cap to how many bitcoins can be mined -

21 million. Therefore every halving means the supply is

reducing. In traditional markets, a reduced supply would

result in price increases. Bitcoin has proven to be no

different during its previous two halvings.

Both halvings have seen the price increase to new

all-time highs. However, this time around bitcoin has a

few more headwinds to face.

During its early years, it was only enthusiasts that were

involved in the crypto market. These are the people who

believed in the project and so were only buyers, causing

a steady price increase. 2017 saw a monumental bull

rally, which forced financial institutions to take note. The participation of these institutions means there are more

sellers involved. And with the introduction of derivatives,

now sellers don’t need to own the asset before they sell it.

Short-term we can expect to see some volatility. But as

the market is maturing and liquidity is increasing, don’t

expect to see an immediate rally back to the highs.

By Cameron Bowen, ATFX UK


25MARKET OUTLOOK

Weekly Bitcoin Chart

Bitcoin Technical Analysis

Due to bitcoins infancy, there isn’t too much data to

analyse previous price patterns. Looking at the weekly

chart we can see that the market was unable to break the

11 December 2017 highs of $19,666 and has since taken

out the 16 December 2019, low of $6,425.

With the break of the low and the failure to take out the

24 June 2019 high of $13,880, we now have confirmed bearish bias and a downtrend with two lower highs and

two lower lows.

The next level of support is the lows of 10 December 2018,

at $3,126, followed by the 10 July 2017 low of $1,830.

Bullish sentiment would come in if this market fails to

take out the lows of 10 December 2018, at $3,126 and

then breaks through the 24 June 2019 high of $13,880.

Whilst that is unexpected at the moment, with the

current market climate and bitcoin’s notorious reputation,

I wouldn’t completely write it off. On the off chance that

does happen, the next resistance level will be the all-time

high of $19,666.

Facebook’s Libra

In other news, Facebook’s L ibra is st i l l t r y ing to

get off the floor.

The Libra project is designed to make the transfer of

money online easier and cheaper. But sceptics say that it

is another ploy to attract new users to the social network.

This has all but been confirmed by Zuckerberg himself, who acknowledged that people using Libra would likely

drive up the cost of advertising on Facebook. Ultimately

benefiting the company.

Originally Facebook said it wanted to launch Libra in the

first half of 2020, which would make Q2 the expected launch date. But with dwindling support the project it

looks like this will be a tough ask.

Mastercard has been the latest company to jump ship but

there are still signs of life as Shopify has been added to

the group. The problem being is that Shopify is only the

21st member of the 100 originally required to launch. No

update has been given about a revised launch date.

26MARKET OUTLOOK

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27MARKET OUTLOOK

THE MARKET ANALYSTS OF ATFXTHE MARKET ANALYSTS OF ATFX

Alejandro Zambrano ATFX Global Chief Market Strategist

Before joining ATFX, Zambrano has been using his invaluable experience to research the financial markets with a special focus on currencies and macroeconomics, throughout his career. He

also covers commodity markets and equity indices. Working for various brokers, Zambrano also developed premium educational programs, and hundreds of people have attended his courses

throughout the years.

Cameron Bowen

ATFX Senior Content Manager

Cameron Bowen is an experienced trader that worked for an Asset Management firm where he assisted in the analysis of an automated trading strategy that required a discretionary overlay. He

also taught in renowned Forex and CFD trading academies in London, creating course material

and regularly hosting live market analysis webinars. Today, he works with ATFX in helping their

clients to understand the markets better.

Martin Lam ATFX Chief Analyst of Asia Pacific

Martin has over 20 years of experience in global investment and consultation. Familiar with

the world stock indices, precious metals such as gold and silver, crude oil and forex. Martin

manages the “Martin Currency Trading Company” and it has in the past worked with a number of

well-known international financial corporations and institutions. Martin is a sought speaker, and has held over 40 seminars and training sessions in South East Asia and China in 2018 and has

been publishing daily market reports for investors.

Dean Chen ATFX (China) Senior Market Analyst

Dean has participated in the global capital markets for over six years with experience to operate

with capital up to 150 million RMB. He has served various positions including risk controller, trader,

and analyst, and has received recognition from numerous industrial key players. Dean has created

the “Hook-Shaped Theory” trading system, and it combines both technical and macroeconomic

analysis, to help with the precise timing to enter and exit the FX markets.

www.atfx.com

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