Coronavirus Spreads Fear into Market
- 27 January 2020
MARKET OBSERVATIONS – 27 Jan 2020
Coronavirus Spreads Fear into Market
Fundamental Outlook Both U.S. and China have signed the truce of tariff hikes and simmer the market tension, During the World Economic Forum held last week in Davos, billionaire investor Soros slammed Trump and Xi with criticism on their agreement on the trade deal and remarked on their behaviours.
The coronavirus epidemic spreads from China Wuhan and crosses borders into Asia and western territories. Till date, more than 1300 cases have been identified on regional base while almost 90 percent cases come from China. So far, 41 deaths have been reported. ON Friday, Dow benchmark fell below 29,000 level lest fear of rapid spread in the contagious disease.
European Central Bank maintains interest rate unchanged at minus 0.5 percent while commits to the continual QE program previously propelled by Mario Draghi. Under the wings of new President - Christine Lagarde, policymakers stay vigilant in purchasing EUR20 billion of bonds monthly and this program will continue progressively till further notice.
WTI Crude prices fell to 11-week low middle last week at USD55 /barrel region. Market is worried of the demand wane from the economic slowdown in China due to epidemic spread.
Technical Forecast USD/JPY topped off 110.00 level after market floated for 3 days above this benchmark. This week, we forecast the trend will be prone to fall while resisted at 110.00 level. Downside support will emerge at 108.00 – 108.30 region in case of drawdown.
EUR/USD fell from 1.1100 major resistance as Dollar strengthened last week. This week, we project the trend will be contained in tight range but prone to weakness. Downside support will emerge at 1.0950 – 1.000 region depending on fundamental values in Dollar Index. Traders are advised to stay prudent when picking bottom in Euro.
GBP/USD has shown a progressive resistance line on the day chart with the recent fall off 1.3150 level. This week, the trend will likely thread in narrow range from 1.3000 – 1.3150 region while making final consolidation. In any case, the downtrend beneath 1.3000 will signal a new selling pressure due to unexpected market news.
Gold prices have been trading in very narrow range last week but slightly showed an initial uptrend on Friday. This week, we reckon the trend might climb and retest USD1590 /oz due to fear of market slowdown in the global epidemic attack. However, the support is identified at USD1540 /oz and should not be violated, otherwise new selling activity will occur.
WTI Crude prices broke beneath USD55 /barrel and showed weakness in global demand. Market signals fear of waning demand in the wake of China’s epidemic spread. This week, we foresee the bears will head down to test USD52 /barrel as our next support before market rebounds. Topside resistance will emerge at USD57.50 /barrel level.
Silver prices have shown strong support at USD17.70 /oz last week. Market is beginning to turn up as fund moves into precious metal as safe haven. This week, we forecast the trend will be contained from USD17.70 – USD18.50 /oz while subject to rising prices.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in whipsaw last week as traders took profit. Market has been firmly resisted at RM2950 /MT as predicted. April20 Futures contract settled at RM2862 /MT on Friday. This week, we forecast the trend will continue to dip at RM2800 /MT level with another lower support rising at RM2750 /MT region. Topside resistance remains consistent at RM2950 /MT level.
DAR Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely at his own. He can be reached at firstname.lastname@example.org