Currencies indicate that the market bottom is yet to come

The dynamics of stocks and currencies on Tuesday were comparable in amplitude, but in the opposite direction to Monday. Investors and traders seemed to be buying beaten shares, expecting stimulus from central banks and governments.

The rush of early buyers should be cooled down. It is much more likely that we saw a peak of volatility on Monday in the markets, but it may not coincide with the bottom of the recession.

On Wednesday morning, Asian indices and futures on American indices turned red again. Investors were disappointed that the US government did not make any announcements, which brought back the demand for safe assets, although not in such a ugly form as on Monday. Once again, the dynamics of the currency market may become a reflection of investor sentiment. And in this case, there are more negative signals tuning for further decline of the markets.

USDCAD, despite the fluctuations in the stock market and cautious purchases of oil, updates the highs on Tuesday. The pair seems to be moving on inertia, having risen above the tops of late-2018 and mid-2017, reflecting the negative mood of American investors.

The AUDUSD trades on Wednesday morning around 0.6500. On Monday alone, the Aussie dropped from 0.6620 to 0.6300 and rose to 0.6680. However, the pair is now near this year low. Most likely, the markets are tuning that the peak of decline is already behind us as the Chinese factories are returning to work. At the same time, investors are waiting for some positive drivers, not rushing to buy risky assets. A decrease in AUDUSD to the same levels of the midst of the global financial crisis showed that sharp fluctuations might become a new reality for Aussie for the next few months. However, the bottom may have already passed here.

EURCHF is quite suitable as an indicator of sentiment in Europe. Since last December, it keeps the downward trend, avoiding the increased volatility in recent days. After sinking below 1.06 at the end of February, the pair entered the lows of 2015 area, reflecting the gradual decline of economic activity in Europe. Buyers became slightly more active as the exchange rate dropped below 1.06, and some indicators register that the selling momentum is weakening. However, so far, there are no significant signals that would allow us to talk about trend reversal upwards from Monday.

Neither buyers’ activity nor government actions allow us to say that the lowest point for the world markets are already behind us.

The FxPro Analyst Team