Daily Market Outlook, February 11, 2020
The US market rebounded in a broad-based rally on Monday, despite lingering fears over the Coronavirus outbreak, leading the S&P 500 and Nasdaq to hit their respective record high. Overall US main indexes rose 0.6-1.1%, as opposed to European and Asian equities that generally finished lower earlier of the day amidst broad risk-off, fueled by deepening worries over the worsening situation in China.
The number of worldwide confirmed cases of the coronavirus outbreak is now over 40,500, with 99% of those cases in mainland China. The number of deaths has breached 1000, with still only two of those outside of mainland China. That said, the virus is spreading, with the number of countries affected increasing. Singapore is the worst-affected country outside of China with 45 confirmed cases. The head of the World Health Organisation said that “In recent days we have seen some concerning instances of onward [coronavirus] transmission from people with no travel history to China, like the cases reported in France yesterday and the UK today. The detection of this small number of cases could be the spark that becomes a bigger fire. But for now, it’s only a spark.”
US bond yields saw little movement, finishing 1-2bps lower along the curve. Gold price was steady at $1572.15/ounce while crude oils plunged by 1.5-2.2% on demand concerns- Brent crude closed at $53.27/barrel.
USD strength retreated slightly on Monday where the greenback was seen performing on a mixed note against its key rivals; the Dollar Index continued to climb in its sixth back-to-back winning session, adding 0.15% to 98.83. The Dollar is expected to remain strong in the short term, supported by lingering and likely deepening concerns over the Coronavirus outbreak in China. Fed Chair Jerome Powell’s bi-annual testimony to Congress Key will be a key driver this week.
German political uncertainty increased, after the expected successor to Chancellor Merkel stepped down as CDU leader.
Eurozone investor sentiment eased in February: The Sentix Investor Confidence Index came in at a lower 5.2 in February (Jan: 7.6), below analysts’ estimate of 5.7. Details show that investors became less optimistic over both current situation and expectations after the Coronavirus outbreak situation deteriorated this month. The index had climbed to a two-year high in January as investors cheered the recently signed US-China trade deal that brightened global trade outlook.
Japan Economic Watchers Survey indicates weak outlook Japan’s: Economic Watcher Survey reported that its outlook index slipped to 41.8 in January (Dec: 45.5) while its current condition index rose to 41.9 (Dec: 39.7). Both indexes remained below 50, indicating that people think conditions are worsening.
Based on CFTC data, the investment community is seen moving back to the USD on the growth concerns and risk-off dynamics. Noncommercial accounts rebuild implied USD longs, from an approximately neutral position, especially against the AUD and EUR. Long term asset managers also cut their implied USD shorts.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.0915 (EUR847mn); 1.0920 (EUR297mn); 1.1000 (EUR402mn); 1.1010 (EUR300mn); 1.1015 (EUR207mn)
- GBPUSD: 1.2850 (GBP201mn); 1.2875 (GBP281mn)
- USDJPY: 110.00 (USD500mn)
- AUDUSD: 0.6715 (AUD231mn); 0.6720 (AUD311mn); 0.6825 (AUD463mn); 0.6835 (AUD547mn); 0.6860 (AUD589mn)
Technical & Trade Views
EURUSD (Intraday bias: Bearish below 1.0940)
EURUSD From a technical and trading perspective, anticipated quick move to test 1.09 bids & stops below underway. Bears will now target the yearly, monthly and weekly pivot confluence sited at 1.0880/70. Look for profit taking to emerge here with a window to form a base for a more sustained correction, to test offers and stops above 1.10
GBPUSD (Intraday bias: Bearish below 1.2970)
GBPUSD From a technical and trading perspective, anticipated test of the yearly pivot underway, the closing breach of this level opens a test of bids towards 1.28 and stops below. On the day only a close back through 1.2970 would confirm further range trade
USDJPY (intraday bias: Bullish above 109.60)
USDJPY From a technical and trading perspective, the sustained grind higher continues, as 109.20 caps corrections look for a test of offers and stops to 110.50. Caution counselled as we test these levels with significant sentiment divergence likely to be addressed once again
AUDUSD (Intraday bias: Bearish below .6720)
AUDUSD From a technical and trading perspective, as anticipated lows vulnerable for retest, beyond here look for a move to test price projection at .6600. On the day only a close above .6740 would suggest minimum conditions for cycle completion have been met and a corrective phase would ensue.
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