Daily Market Outlook, February 12, 2020 

The Global market broadly gained on Tuesday on easing Coronavirus concerns as investors weighed positive developments such as smaller increases in reported cases and Chinese officials’ optimism that the outbreak could be contained by April. 

Stoxx Europe 600 rose 0.9% to all-time high and the Hang Seng index surged by 1.3%. 

In the US, Fed Chair Jerome Powell began his bi-annual testimony before Congress, remarking that the Fed is closely monitoring the potential virus-related global economic disruption. 

The S&P 500 and NASDAQ managed to post a tiny 0.1% gain to hit their record highs for the second consecutive session while the Dow Jones was unchanged. 

Bond yields picked up around 3bps, gold futures dropped 0.3% to $1567.89/ounce while crude oils gained 0.8-1.4%- Brent crude settled at $54.01/barrel. 

Dollar strength receded amidst better risk sentiment – USD slipped against nearly all majors, the GBP climbed by 0.3% as its 4Q GDP growth met expectation. 

The RBNZ as expected kept its official cash rate unchanged at 1.0% overnight, however, the RBNZ suggested no more rate cuts for 2020. The market was expecting a slight dovish RBNZ but were disappointed. On top of that the central bank forecasts rates may start to rise in 2021.

US small business sentiment lifted at start of 2020: The NFIB Small Business Optimism Index jumped to 104.3 in January (Dec: 102.7) reflecting a rebound in business confidence among small firms in the US. Surveyed firms were reportedly turning more upbeat over sales prospects but pointed out that finding qualified employees remains a challenge in a very tight job market.  

UK economy stagnated in 4Q: UK 4Q GDP growth came in at 0.0% (3Q: +0.4%), meeting expectations of zero growth in the last quarter of 2019 when the country grappled with election and Brexit uncertainties. The stagnation reflects positive contribution from net exports which was being offset by huge negative contribution from gross capital formation as businesses hold back from spending ahead of Brexit deadlines. Household consumption made only a minor addition to headline GDP, indicating consumers’ cautious spending behaviour. On a yearly basis, GDP growth eased to 1.1% YOY (3Q: +1.2%), leaving the full year 2019 growth rate at 1.4% (2018: +1.3%), slightly faster than 2018’s. Meanwhile on a separate note, consistent with PMI reading, industrial production eked out a 0.1% MOM gain in December (Nov: -1.1%) reflecting the beginning of a rebound in output towards year-end as Brexit uncertainties lifted considerably following an early December election. Goods trade deficit narrowed to £845m in the same month (Nov: -£4.94b) as exports jumped 17.4% MOM while imports were flat.  

Australia home loans jumped in December; business confidence little changed: The value of home loans approved in Australia surged by 4.4% MOM in December (Nov: +1.9% revised) thanks to a jump in owner occupied loan value (+5.1% vs +1.6%) and a bigger gain in investor loan value as well (+2.2% vs +2.5%), reaffirming expectations that the housing market continues to pick up momentum and recover on the back of low interest rates. Meanwhile, the headline NAB Business Confidence Index was little changed at -1 in January (Dec: -2) with the Business Condition Index being flat at 3, indicating generally steady sentiment among Australian businesses

Today’s Options Expiries for 10AM New York Cut (notable size in bold)

  • EURUSD: 1.0900 (EUR722mn); 1.0910 (USD629mn); 1.0920 (EUR328mn); 1.0955 (EUR497mn); 1.0980 (EUR246mn); 1.1000 (EUR541mn)
  • GBPUSD: 1.2890 (GBP282mn); 1.2925 (GBP387mn); 1.2975 (GBP240mn); 1.3000 (GBP819mn); 1.3020 (GBP201mn); 1.3120 (GBP434mn)
  • USDJPY: 108.45 (USD356mn); 108.50 (USD676mn); 109.00 (USD961mn); 110.00 (USD502mn); 110.05 (USD775mn)
  • AUDUSD: 0.6700 (AUD2.1bn); 0.6750 (AUD795mn)

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 Bullish above)

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. Yesterday reversal flipped the daily chart bullish as per the near term volume weighted average price look for follow through to test offers and stops above 1.30, to suggest a base is in place for further corrective upside

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 Bullish above)

AUDUSD From a technical and trading perspective, the day only a close above .6740 would suggest minimum conditions for cycle completion have been met and as such another corrective phase is underway, only a move through .6770 would encourage further short covering and encourage further upside corrective action

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