I wrote my last commentary two weeks ago before embarking on a trip to the UK to address some family issues. My last opening comment was ‘today is the day markets got serious about Coronavirus’.

And in just two weeks we now have a global pandemic, borders sealed, economies nose-diving, people all over the world over being isolated.

And it’s now Covid-19. In just two weeks! Trying to make sense of markets and commentate on the madness is challenging. Looking at technicals almost pointless. But I will attempt to provide some clarity where I can and some words of wisdom where necessary.

Monday was brutal. 1987 all over again. During Asian trading, US futures hit the 5% limit up. Could the markets sustain a pullback after such carnage? Initially no. The first 15 mins of US equity trading saw all those gains evaporate and then some. But of course, that’s not a new phenomenon.

However things did turn positive and with rumours of a potential 1 trillion USD stimulus package in the US, equities close on their highs with the DJ up over 1,000 points.

In FX the directionless chop continues. EURUSD dropped from 1.1190 to 1.0955 before ending the day just above 1.1000. USDJPY spent most of the day rallying, climbing from 106.20 to 107.85 before closing nearer 107.55.

XAU used to be the safe-haven of choice and when I say used to be, I’m talking two weeks ago! Now it’s driven by whatever traders need to do to fund other positions. Initially we drop from 1,520 to 1,466 but as the day got brighter, we end up rallying back as high as 1,550 before closing at 1.535. What happens next is anyone’s guess. It feels like it has to get a lot worse before it gets better on the ground. How much that translates into FX and equity markets remains to be seen.

I’ll be honest and say in times of unprecedented volatility I’m not sure how much significance charts play. Anything short term I would say is almost irrelevant as its a market-driven by what has to be done rather than what wants to be done.

So what do I have for you? A weekly AUDUSD chart stretching back to the financial crisis (2008). At that time the 0.6000 level never broke.

Today we dropped as low as 0.5960 before rallying back to 0.6010. If AUD is a bellwether for the severity of the crisis in front of us, then in the space of a couple of weeks we have exceeded the financial crisis of 2008.

What that means going forward…..well let’s just hope it’s not as bad as we fear. Stay safe my friends.


David Hannigan
Author

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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