Reaction to the revived concerns of the scope of the Coronavirus (or COVID-19 which is the World Health Organisation’s new official name) drove a knee-jerk reaction back into safety on financial markets yesterday. nevertheless, the move seems to have been ephemeral. Initial moves were loosely retraced into the close and there is a sense that the dust is quickly subsiding this morning. Bond yields have rebounded, the Chinese yuan recovered, whilst there was a notable degree of support for oil. There is still much uncertainty on a day to day basis, but the bulls will be bucked up by the reaction into yesterday’s close. Away from the broader sentiment moves of the Coronavirus, there is a significant sell-off on the pecuniary unit taking hold. Priced once against the US dollar, the pecuniary unit plunged to multi-year lows yesterday and remains deeply oversold. Fears of sluggish growth for the monetary unitzone will come under the spotlight today with the Q4 GDP information. With the ECB pecuniary policy fuel running on exhaust, the economic recovery that was meant to be coming in the monetary unitzone this year is some way off. If the pecuniary unit is thing to go by, then traders are vote with their feet. nevertheless, the momentum of the sell-off is significantly over-stretched now and the potential for a sharp technical rally rises by the day. The strong daily moves on EUR may not be about to stop any time soon.
Wall Street recovered some intraday losings to close gently lower (S&P 500 -0.2% at 3374). With US futures slightly higher early today (+0.2%) this has resulted in a mixed Asian session (Nikkei -0.6%, Shanghai Composite +0.4%) and monetary unitpean markets to look towards positive opens today (FTSE futures and DAX futures some +0.2%). In forex, there is little real move, but it is absorbing that the trade good currencies are border higher once again, with AUD and CAD acting well. In commodities, the rally on gold has just begun to dissipate once again, whilst oil is marginally positive in early moves.
The second reading of monetary unitzone growth is in focus during the monetary unitpean morning. monetary unitzone Flash GDP for Q4 is at 1000GMT and is expected to be confirmed at +0.1% (+0.1% at prelim first reading). The main information for the day is US Retail gross gross sales at 1330GMT which is expected to see core ex-autos monthly gross sales increase by +0.3% in January (having adult by +0.7% in December). The USIndustrial Production for January is at 1415GMT and is expected to decline by -0.2% (having fallen by -0.3% in December). Finally, keep an eye out for prelim Michigan Sentiment for February at 1500GMT. The headline is expected to slip slightly to 99.5 (from 99.8 in January), driven by a slight decline in the Michigan Expectations component to 90.3 (from 90.5) whilst MichiganCurrent Conditions are expected to improve slightly to 115.0 (from 114.4 in January).
Chart of the Day – EUR/GBP
We could have picked any one of the pecuniary unit crosses to show the current plight of the stricken pecuniary unit. EUR/GBP suffered significant merchandising pressure yesterday with a massive negative candle holder fast the market to close at its last level since the immediate Brexit vote aftermath in late June 2016. The market saw an intraday low and later bounced off £0.8275 in December but the negative pressure presently building crosswise the monetary unit, suggests that this is a support likely to at least be tested now. Momentum is very bearishly designed but besides retains side potential. With RSI still above 30 (systematically at or below 30 throughout much of October and December), MACD lines only just having bear-crossed lower below neutral, the Stochastics are besides falling bearishly below 20 now. The market has been in a multi-month downtrend for several months now (coming in around £0.8485 today) but having broken decisively below £0.8390 support yesterday, this now becomes overhead supply for a technical rally. pessimistic configuration is confirmed crosswise the hourly chart indicators and any intraday rebound that pulls the hourly RSI towards 50 looks like an chance to sell. Below £0.8275 is pretty open towards £0.8100/£0.8115.
The big concern for anyone long of the pecuniary unit right now is that the breakdown below $1.0875 has barely even looked back. The market is deeply oversold on a historic basis and the suggestion is that a technical rally is later due. nevertheless, there is little appetency to support the market right now and it is just not stopping. EUR/USD is now the last it has been since April 2017 and the next real support is not until $1.0500/$1.0570. This all makes commerce EUR/USD a game with heightened risk right now. The market is intent on falling, but with the elastic of the RSI so overstretched, if a technical rally sets in, it could be a substantial rebound. For a number of years now, we have been on the lookout for potential signals of recovery. The hourly chart RSI moving decisively above 50 would be a signal for confirmation, but is still some way off this morning. No lower high of any substantial degree has been breached throughout the near two week sell-off. So we are besides observation initial resistance $1.0865/$1.0890. We are very cautious of being caught too short on the pecuniary unit right now.
The case for some other rebound inside the medium term range has been building for a number of years now. Yesterday saw the decisive move higher, back through all the resistance between $1.2940/$1.3000 and into a more neutral position once more inside the range. Momentum indicators have swung back into more of a construction configuration for sterling and the next resistance at $1.3070 is being tested. If the Cable bulls can break through this initial barrier today then the outlook improves for a move back towards the old 23.6% Fibonacci retracement around $1.3200 once again and the February high at $1.3215. The move has helped to re-assert our view that sterling does not want to go lower for very long. It may have been a political event to help the move yesterday (a change of UK Chancellor opens for potential financial loosening, which is seen as sterling positive), but the medium term outlook remains underpinned to buy Cable into weakness. Support at $1.2870 has firmed.
Yesterday’s negative candle dragged the bulls back once again and suggests that the market is gravitating around the 109.70 break once more. This moves of the past week and a half suggest that Dollar/Yen is in fairly tight consolidation. The market is being supported on intraday weakness into the band 109.50/109.70, whilst unable to push through resistance 110.00/110.15. We continue to see Dollar/Yen with a mild positive bias and see near term weakness as a chance to buy. As the market has listed with a mix of candle holders in recent Sessions, momentum indicators are slightly positively designed (RSI systematically above 50, MACD lines advancing above neutral and Stochastics above 80). This positive bias will remain whilst the market trades above the pivot around 109.25. We continue to favour a move to test 110.30 in due course.
There is a slight positive bias that has returned to the gold market in the past 24/36 hours. This comes as broad market sentiment has taken fright once more from the Coronavirus and an associated move back into safe have possession has been seen. The question is now whether gold can begin to find traction and break the shackles of the consolidation of recent weeks. commerce clear of the 23.6% Fibonacci retracement (of $1445/$1611) at $1572 and near term resistance at $1577 would open a test of $1591. Whilst the market is testing this barrier once again this morning, right now it is unable to make the break. The hourly chart shows the growing importance of $1562 as near term support now, nevertheless, there is more that is needful from the bulls to really break free. The hourly RSI may be between 50/70 systematically is the past day or so, but inevitably to push above 70 to really suggest the bulls are finding traction. Hourly MACD and Stochastics rolling over in the past 12 hours or so does not suggest the bulls are ready yet. Watch initial support at $1571 as a basis for a new near term higher low formation now. If this is decisively breached this morning, it would suggest the bulls are pull back once again.
There is an increasing sense that a recovery is building on WTI. A strong positive candle on Wednesday had its certificate tested early yesterday, but a decent recovery into the close has helped to drive what is an progressively encouraging set of momentum indicators. The bull crosses coming through on MACD lines and besides Stochastics, whilst RSI is rising at its highest level in three weeks. The resistance around $52.20 is key for recovery now, being a pivot and besides neck for a potential base pattern. A close above would imply around $2.70 of extra recovery which would be a move back to the old key floor $54.75/$55.00. We talked about the $50.50/$51.00 band becoming support and yesterday’s higher low at $50.60 is progressively important. The market is fairly settled this morning, but the signs of recovery are growing.
Dow Jones Industrial Average
The Dow does not have the feel of a market that wants to go down for too long at the moment. A close lower of just under half a percentage has seen a pullback from the all time high of 29,568 nevertheless the optimistic technical aspects of the chart remain firm. The daily candle holder was a very small bodied negative candle, but with momentum indicators still positively designed, weakness is just a chance to buy still. With the RSI above 60, MACD are rising and Stochastics lines are The unwind is back to the first break support area between the old highs 29,374/29,415. All moving averages are rising in optimistic sequence and once again suggest purchasing into weakness. The bulls will remain in control at the least whilst the pivot support band 28,950/29,000 holds. There is still little technical reason not to expect the incomparable high of 29,568 to be retested and breached, to then open the way towards 30,000.