Oil hits 18-year lows (time to buy), Fitch presses on the pound

The start of the week was surprisingly calm. Honestly, looking at the figures for the number of confirmed coronavirus cases in the United States (exceeded 160K) and Trump's return to reality (he decided to abandon the idea of full economic activity within two weeks), we expected a return to sales on the stock market and increased pressure on the dollar.

But this entire negative was absorbed but the oil. WTI prices reached the minimum values for the last 18 years. The current market sentiment in the complete absence of positive news continues to remain on the side of bears. In general, what is happening is logical: the economic crisis inevitably provokes a fall in commodity markets.

But the case of oil, in our opinion, is quite unique. The fact is that oil collapsed before it became clear that we were dealing with a global economic crisis. This refers to its epic drop of 30% following the OPEC+ gap. That is, oil has exhausted its reasonable potential for reducing in advance. Now oil has to fall below reasonable limits due to general pressure on commodity markets.

Our medium-term trading position for oil yesterday was finally formed. We added to the already opened purchases the last long position opened near $20. Recall that the motivation for this trade is that current prices are already below the average costs in the market, which means that oil is doomed to rise in perspective. It may take months, but ultimately, the price of oil should return to its fair value.

Let’s get back to the other news. Fitch rating agency downgraded the UK sovereign debt rating from AA to AA-, justifying this by a sharp increase in the country's debt, as well as uncertainty with trade negotiations with the EU. Our position on the pound is twofold. In the medium term, in our opinion, his chances of growth are good. But here and now (this week) we are likely to sell the pound against the dollar, at least until the GBPUSD is below 1.25.

Dooms day clock is ticking out. According to most experts, if there will be no turning point for the better in the next few weeks, the world will almost certainly plunge into a deep global recession with all the sad consequences.

In this regard, we recall our recommendation to buy gold. The goal of the current movement has not yet been achieved (we are talking about a re-test of 1700), so this week the growth of asset prices, in our opinion, should continue.