Virus Second Wave Has Markets Spooked

06/17/2020 6:00 am EST

Focus: FOREX

Adam Button

Co-Owner and Managing Director,

Fears of a new wave of infections has investors move to safe havens, reports Adam Button.

Rising virus cases in a number of U.S. and China hotspots have put risk trades on the defensive as the market weighs that against easy money policies. The Swiss franc (CHF) and euro (EUR) are the highest performers, while gold and silver attempt to recover further from Monday's lows.

Hotspot Hopscotch - Tweet Monday Fakeout (Chart 1)

The Commodity Futures Trading Commission (CFTC) Commitments of Traders (COT) data showed euro net longs at the highest in two years (see below). It is also interesting to mention last week's note from JP Morgan's quantitative strategist Marko Kolanovic, who's had a solid track record in calling major moves in stock indexes over the last seven months: “With the recent market pullback, we are again more comfortable with taking a positive view. Positioning in equities did not increase significantly and China risks appear to be abating.” 

Kolanovic added that a second wave of infections was “unlikely” and that trend-following strategies were largely absent from the latest run-ups.

The re-opening narrative is running into a hard truth: That many people won't participate in the economy until it's safe. Those who are overzealous might face a second wave.

The United States remains the main focus and a number of primarily southern states where Coronavirus case rates are rising. Florida reported record numbers on Saturday and Texas hospitalizations continue to rise. Headlines from those hotspots began to move the market late last week but it's certainly a global story.

The overall number of new cases on Saturday hit a record of 142,672 with Latin America the epicenter. However Saudi Arabian new cases hit a record Sunday and deaths in Iran hit a two-month high.

okyo reported the most cases in five weeks with half traced back to nightclubs. Even China is slipping backwards with Beijing forced to lockdown part of the city because of local transmission.

In a sense, none of this is particularly surprising so what happens next will be a test of how much short-term bad news the long-term bulls can withstand. Early-week indications are soft but certainly not insurmountable.


Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR +96K vs +81K prior GBP -24K vs -36K prior JPY +17K vs +33K prior CHF +2K vs +9K prior CAD -23K vs -33K prior AUD -37K vs -41K prior NZD -11K vs -13K prior
The specs largely disbelieve the reopening story, but the enormous long-euro position can't be ignored.

Adam Button is co-owner and managing director of and a contributor at You can see Ashraf’s daily analysis at and sign up for the Premium Insights. Ashraf's Tweet on indices here.

Ashraf on Trends in Yield Differentials

Related Articles on FOREX

Keyword Image
August Seasonals
08/03/2020 9:08 am EST

Stock indexes tend to underperform in August, reports Adam Button....