ZFX: Helicopter Money is here! Gold price jumped but not stock?
Review:
Monday (March 23) the global financial markets are still pessimistic. However, a breaking news rocked the market causing volatility. Before the US market open, the Federal Reserve (Fed) announced that it will implement an unlimited version of quantitative easing (QE). The Fed announced that it will buy assets like US Treasury and Mortgage-Backed Securities (MBS) “in the amounts needed” to deal with the coronavirus crisis.
The Fed said that in order to keep financing costs low, it will buy US $375 billion in US Treasuries and US $250 billion in MBS this week, and will launch a series of plans aimed at helping markets function more efficiently.
ZFX analyst Jacob Leung said that this is undoubtedly a “helicopter money”. The concept is that all the debt in the market can be transferred to the Fed.
However, the three major Wall Street indexes were only boosted in short term, and eventually fell back down. One of the main reasons was that the US Senate have not yet passed the trillion-dollar economic stimulus plan. In addition, investors in the market are still digesting the sudden “move”, which will take some more time.
ZFX analyst Jacob Leung said that it is good to have enough tools to inject liquidity into the market. But, “helicopter money” will cause side effect, such as hyperinflation. Precious metals or some essential commodities may be sought afterward by the whole market.
After the big news on Monday, the dollar fell significantly at that movement, and most of the major currencies jumped more than a hundred pips against the dollar. However, the strongest reaction was the gold. Gold price rose sharply from $1490 to $1560, and silver price also rose above the $13 level.
The market sentiment is relatively stable on Tuesday, in the morning session, the stock markets in the Asia-Pacific region generally rebounded, at least correcting Monday’s decline. Strategically, new factors have been added to the financial market, which is expected to be more volatile.
AUD / USD
Market theme / sentiment: The Fed’s policy is positive for commodities and the Australian dollar has skyrocketed.
Support levels: 0.5850; 0.5700 Resistance levels: 0.5950; 0.6050
Recommendation: wait and see. (It is recommended not to consider the bid-ask spread factor)
Position follow-up and profit and loss: 0.58 has been shorted, with a target of 0.5750. (TP) (It is recommended not to consider the bid-ask spread factor)
Cumulative profit and loss: 495 pips
EUR / USD
Market theme / sentiment: Euro bounced back due to the Fed’s policy.
Support levels: 1.0750; 1.0680 Resistance levels: 1.0820; 1.0930
Recommendation: short 1.0780, target 1.0760, stop loss 1.0810. (It is recommended not to consider the bid-ask spread factor)
Position follow-up and profit and loss: 1.0690 has been shorted and the stop loss is at 1.0710. (Stop Loss) (It is recommended not to consider the bid-ask spread factor)
Cumulative profit and loss: 445 pips
GBP / USD
Market theme / sentiment: Under the epidemic situation, the pound has not seen big improvement.
Support levels: 1.1600; 1.1550 Resistance levels: 1.1750; 1.1800
Recommendation: wait and see. (It is recommended not to consider the bid-ask spread factor)
Position follow-up and profit and loss: 1.1750 short, position not yet opened, target 1.1700, stop loss 1.1780. (Pending) (It is recommended not to consider the bid-ask spread factor)
Cumulative profit and loss: 290 pips
GOLD
Market theme / sentiment: Gold price surged due to the Fed policy.
Support level: 1550; 1530 Resistance level: 1580; 1600
Recommendation: wait and see. (It is recommended not to consider the bid-ask spread factor)
Position follow-up and profit and loss: short 1475, target 1465, stop loss 1485. (Cancelled) (It is recommended not to consider the bid-ask spread factor)
Cumulative profit and loss: -70 USD
USOIL (US crude oil)
Market theme / sentiment: The Fed news boosted, weak oil prices rebounded.
Support levels: 24.20; 23.10 Resistance levels: 25.30; 26.50
Recommendation: short 23.8, target 23.2, stop loss 24.5. (It is recommended not to consider the bid-ask spread factor)
Position follow-up and profit and loss: 23.5 has been shorted, with a target of 22.5. (TP) (It is recommended not to consider the bid-ask spread factor)
Cumulative profit and loss: $ 9.8
Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX is not responsible for any form of loss caused by any trading operations conducted in accordance with this article. Please be firm in your thinking and take appropriate risk control.