Market Meltdown as Gold, Equities, Oil Slump
Almost all asset classes, with the exception of bonds, closed strongly bearish into Friday’s close. Even safe-haven precious metals succumbed to the panic. Economic data was pushed to the backseat. Investors ignored the 0.6% monthly increase in personal income and a strongly bullish Chicago PMI reading. Over the weekend, China’s manufacturing and non-manufacturing PMI fell to multi-year lows of 35.7 and 29.6 for February.
German Inflation Holds Steady in February
The latest flash estimates from Germany saw consumer prices rising on a month over month basis. But overall, on a yearly basis, German inflation was steady. Data from Destatis showed that headline CPI grew 0.4% on the month. This put the year over year inflation at 1.7%. This was the same pace of increase as in January and the highest since July last year.
EURUSD Comfortable at a Three-Week High
The EURUSD currency pair closed with bullish gains on Friday. Price action hit a three-week high before settling above the support area of 1.1000. The next upside target is the resistance area of 1.1100 and 1.1072. A breakout above this level could trigger further gains. But if the breakout fails, watch for a possible cup and handle pattern forming.
Crude Oil Prices Slump Amid Market Meltdown
Crude oil prices fell a further 2% into Friday’s close. The declines came following another strong day of selling, reflecting investor sentiment. The slump in crude oil follows similar trends in many other assets, notwithstanding the safe-haven gold as well. With OPEC members staying on the sidelines, investors are bearish on the commodity.
Can WTI Crude Oil Recover from the Slump?
WTI crude oil prices fell over 2% on Friday and hit a multi-year support level near 45.20. Given that this level held in the past, we expect to see some consolidation. The Stochastics oscillator points to a low momentum currently. Therefore, oil prices need to establish the bounce above 46.50 for any signs of a rebound.
Gold Drops Over 3% on Forced Selling
In a surprising move, gold prices fell over 3% during the same week when the safe-haven asset hit a seven-year high. The drop is blamed on investors having to book profits to fund margin calls in riskier assets. Similar trends were seen in other metals such as Platinum and Silver. Silver prices were down close to 10%.
XAUUSD Short Term Correction was Quick
The decline in gold prices was quick. After failing to break past the 1655 resistance, price turned bearish rather quickly. This led to the initial break down below 1631.90 and later price action fell to the lower support at 1572 – 1568. In the near term, we expect a rebound with price likely to trade within the said levels.