Coronavirus outbreak death toll weighs down market bulls, US macro data in focus.
Summary: The global financial market is off to a dovish start for the week. Asian markets saw little activity despite prevalent bearish sentiment as all key markets aside from India & Japan were closed during today’s Pacific-Asian market hours on holiday celebrations in the respective local markets.
European markets saw a monumental drop in the price of major risk assets and key index futures wiping off billions of Euros at the start of the session. The gap down move was influenced by a spike in Chinese virus outbreak woes. While WHO’s report did help markets calm down to some extent, reports of virus outbreak-related death toll breaching 80 people and virus outbreak spreading to 10 other countries with major economic hubs such as France, Japan & US among those nation which fell victim to virus caused major spike in coronavirus outbreak-related woes. Measures taken by China to extend the holiday and enact travel ban in-a bid to contain virus outbreak seems futile at the moment.
Meanwhile, the shutdown of travel and various other measures taken by the Chinese government are causing a sharp drop in Chinese GDP in short term and are also affecting trade-dependent nations which have regular import/export ties with the country. This has caused trade-dependent European economy to take a sharp hit despite today’s subdued trading volume and liquidity. Demand for safe-haven assets rose sharply fuelling fund flow into bond and precious metals market.
Precious Metals: Amid holiday thin market, virus outbreak woes greatly affect risk sentiment in market fuelling demand for the safe-haven market. This has caused a sharp increase in fund flow into rare metals market pushing the price of gold, silver and other precious metals in an upward direction.
Crude Oil: Crude oil price sees a sharp decline in the global market today. Travel ban and various shutdowns have resulted in a sharp drop in demand from China which has caused demand to supply ratio to fall in favor of unexpectedly large glut scenario causing the decline.
AUD/USD: Nothing much has changed for the pair since Friday as AUD bulls keep suffering from a multi-pronged bearish attack. As Woes surrounding Chinese Virus outbreak continues to affect tourism and trade industries of the Australian economy pushing the price to fresh two month lows below 0.68 handle today.
On The Lookout: Main focus remains on Brexit proceedings this week as the deadline for Brexit is less than a week away. However, the immediate focus remains on escalating virus outbreak-related concerns as China failed to contain outbreak resulting in a new strain of coronavirus spreading to 10 other countries now. China has extended its holiday celebrations and travel ban/city containment measures to try and control the outbreak as soon as possible.
Headlines saw fresh evidence come to light on allegations of President Trump’s abuse of office and attempts to impair his competitor for upcoming election Mr. Joe Biden, however, the same is unlikely to cause major uproar given republican senate rules dictated last week unless major exceptions are made which also seems unlikely at the moment. On the release front, US economic calendar will see a release of new home sales data while US earnings calendar sees a release of quarterly data from Juniper, F5 Networks, PerkinElmer, DR Horton and Whirlpool.
Trading Perspective: US futures saw a sharp decline in the international market ahead of Wall Street opening on escalating virus outbreak woes. However, declines were capped as major Asian markets were closed on account of holiday celebrations.
EUR/USD: The pair is trading with strong dovish bias today as Brexit woes and broad-based caution and coronavirus outbreak weigh down EURO bulls. The price of pair is well below mid-1.10 handle but strong support near 1.10 handle keeps downside in check. Data from the US market later in the day will provide directional cues with positive outcome suggesting decline below 1.10 handle towards the next support level at the mid-1.09 handle.
GBP/USD: The pair continues to trade with clear dovish bias as nearing Brexit deadline adds a significant level of pressure on GBP bulls while broad-based risk-averse cautious investor tone adds fuel to market bears. There was a temporary reprieve on positive UK data but the price has since declined as momentum is dictated by bears. Firm USD prevents any chance for GBP to gain further upside in the immediate future. Traders now await US new home sales data for short term profit opportunities.
USD/CAD: The pair finally managed to gain clear bias after nearly five trading session as firm USD slowly managed to conquer several major resistance levels. The pair is currently trading at fresh 1 month highs above 1.3180 handle. Weaker Crude oil price and broad-based caution on coronavirus outbreak woes weigh down CAD while broad-based safe-haven demand and risk currency sell-off fuels USD demand. Traders now await US data for short term profit opportunities.
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