Market sentiment analysis:
- Traders have become more confident that US action to boost the markets’ liquidity and stabilize the economy will steady falling prices.
- However, rallies in stocks and other “risk on” assets may not last long and traders should be wary of a resumption of their downward slide.
Trader confidence better but fragile
Trader sentiment has improved as China removes some restrictions on travel, the Federal Reserve promises unlimited US Dollar funding and a US fiscal package awaits Congressional approval. However, the risk of a further downturn has not gone away and trader confidence remains low.
This improvement can be seen in the chart below of the US Dollar index (DXY), which shows the rush into Dollars and into cash has reduced, ending its sharp increase for now.
US Dollar Index, One-Hour Timeframe (March 9-24, 2020)
Chart by IG (You can click on it for a larger image)
Recommended by Martin Essex, MSTA
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However, while Democrats and Republicans in Congress argue about the $2 trillion coronavirus economic stimulus package, the possibility remains of further slides for stocks, crude oil and currencies like GBP and AUD even if a bipartisan deal can be reached.
In this webinar, I looked at the trends in the major currency, commodity and stock markets, at the forward-looking data on the economic calendar this week, at the IG Client Sentiment page on the DailyFX website, and at the IG Client Sentiment reports that accompany it. You might also like to check out the DailyFX Trading Global Markets Decoded podcasts.
Historical Volatility: A Timeline of the Biggest Volatility Cycles
— Written by Martin Essex, Analyst and Editor
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