A new week is upon us and with that comes some new focus. Monday was a holiday in the US which saw equity and bond markets closed.
FX was very quiet around the globe, so I won’t bore you with the lack of activity.
Tuesday, however, would be a different story. HK’s outlook was downgraded by Moody’s. The Bank of Japan (BOJ) had its monetary policy statement.
The Chinese coronavirus continues to spread with further deaths and confirmation that it can be passed from human to human. The Davos Economic Form begins with President Trump wasting no time to take a swipe as his two favourite targets – climate change activists and the Fed!
And there is the small matter of the President’s impeachment trial. Add in some economic data releases from the UK and Germany and we have a full day of action in front of us.
So what did all this mean for the markets?
For Asia, it would be an immediate ‘risk-off’ scenario with all Asian equity markets heading lower, the Hang Seng closing down by more than 2.8%.
For FX, the main mover would be USDJPY, falling from 110.20 to 109.89. With that JPY crosses would also move lower, EURJPY dropping from 122.20 to 121.88.
XAU would head the other way climbing to a high of 1,568. Better than expected employment and earnings data in the UK saw GBPUSD rally from 1.3010 to 1.3083.
And better-than-expected ZEW data from Germany (economic sentiment and conditions) had EURUSD rally from 1.1090 to 1.1118.
From the doom and gloom of Asia, we have some bright spots in Europe which would have XAU do a full reversal back to 1,552 and help US equity futures rally off their worst levels.
Wall Street opens with some minor losses, the DJ down 50 points. And that would improve during the US morning, with both the S&P and Nasdaq making it into positive territory.
USDJPY would briefly touch 110.10. And so the US market would shrug off the negativity from Asia, but that would change on two headlines.
Firstly a statement from Boeing that they do not expect regulators to sign off on the 737 Max until mid-2020. Boeing stock dives, taking the DJ with it.
Then, the news that the CDC (Centre for Disease Control) has announced the first coronavirus case in the US. Now the whole market heads south, the DJ down 200 points at one point.
USDJPY drops to 109.76 and EURUSD to 1.1081 as EURJPY drops back to 121.72. XAU rallies back to 1,560.
Equities close off their worst levels, but the DJ is still down 152 points. It’s a messy end to the day with the coronavirus headline catching the market off guard.
Onto our chart for the day and I’m revisiting AUDUSD. Just a reminder of the head and shoulder pattern on the hourly chart with Aussie employment data looming. 0.6840 the big level.
I will let you decide the best way to potentially trade it. Keep in mind that Australia also has a suspected case of the coronavirus, so plenty of negative sentiment at the moment down under.
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