Market sentiment analysis:
- Trader confidence in ‘risk on’ assets such as stock market indexes and currencies such as the AUD, GBP and EUR has improved as several countries ease restrictions imposed to control the coronavirus pandemic.
- That improvement in sentiment should continue to lift the prices of those assets unless a second wave of Covid-19 infections forces governments to clamp down again.
Trader confidence boosting riskier assets
Traders are becoming increasingly confident that the coronavirus outbreak has peaked, allowing governments worldwide to ease the restrictions imposed to prevent it spreading. That is helping the prices of assets seen as relatively risky, including the main global stock market indexes and currencies such as the Australian and New Zealand Dollars, the British Pound and the Euro.
Sentiment has been helped too by China’s apparent willingness to continue with economic stimulus, offsetting concerns about the US-China dispute and the current unrest in Hong Kong. Moreover, the prices of currencies like the AUD could well rise further unless a further wave of infections forces government to reverse course.
AUD/USD Price Chart, One-Hour Timeframe (May 18-26, 2020)
Chart by IG (You can click on it for a larger image)
| Change in | Longs | Shorts | OI |
| Daily | 2% | 21% | 5% |
| Weekly | 24% | -18% | 13% |
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.
If you’d like to find out how short selling is used in a downtrend or to hedge currency exposure, you can check out this article here.
--- Written by Martin Essex, Analyst and Editor
Feel free to contact me via the comments section below
