Daily Market Outlook, March 06, 2020 

Daily Market Outlook, March 06, 2020 

Daily Market Outlook, March 06, 2020 

forex guide

The US market melted overnight, safe havens jumped on mounting Covid-19 fear. Equities sold off again in the US and Europe overnight following Wednesday’s brief rebound as extended Covid-19 fear weighed on investor sentiment, dragging down major indexes back into the reds.

Markets grappled with headlines of mounting cases and death tolls around the world; California declared a state of emergency after reporting its first death. 

Thursday’s painful session saw the Dow Jones losing nearly 970pts or 3.6% and the S&P 500 and NASDAQ closing down 3.4% and 3.1%; European key stock benchmarks dropped around 1.5-2%. 

Traders bid up safe haven assets amid flight to safety, pushing Treasury yields lower by 10-16bps; 10Y UST yield plummeted 14bps DOD to below 1% again at an all-time low of 0.912%. 

Gold prices resumed more-than-2% climb to a seven-year high of $1672.23/ounce. 

Crude oils fell despite news that OPEC has agreed to cut by an extra 1.5mil barrels per day until end 2Q2020 (in addition to current – 2.1mil BPD that would last throughout 2020) on condition that Russia and other OPEC+ members would join in the effort to support falling crude oil prices hit by Covid-19. Focus shifts to today’s US nonfarm job report. 

US initial jobless claims dropped to 216k: The number of Americans claiming for unemployment benefits fell by 3k to a seasonally adjusted 216k last week according to the Labor Department data. Number for the previous week was unrevised at 219k. The 4-week moving average of initial jobless claims, that removes week-to-week volatility, added 3.25k to 213k last week (previous: 209.75k)  

US business investment picked up in Jan: US headline factory orders dropped 0.5% MOM in January (Dec: +1.9% revised) thanks to a sharp fall in the volatile defense orders (-39.8%). Durable goods orders were little changed (-0.2% vs +2.8%). Notably, orders and shipments of core capital goods orders (non-defense capital goods excluding aircrafts) rose 1.1% and 1.0% MOM respectively, indicating a rebound in business investment. 

Japan household spending failed to recover before the virus hit; Jump in pay is likely temporary: Household spending dropped 3.9% YOY in January (Dec: -4.8%),marking its fourth month of back-to-back contraction since October when the government raised consumption tax (8% to 10%). The poor January print hasn’t reflected the impact of Covid-19 spread in the country and was largely an extension of weak spending following the tax hike. The rapid spread of the virus in Japan removes hope of any recovery (in spending) in the near term on the back of weakening demand amid cautious consumer sentiment and falling visitor arrivals. On a brighter note, labour cash earnings, a gauge of wage growth topped estimates to record a 1.5% YOY growth thanks to a jump in regular or base pay (+1.4% vs +0.3%) alongside higher bonus payout (+10.4% vs -0.4%). Overtime pay continued to fall (-1.8% vs -2.3%) to indicate weak corporate activity at the start of the year, in line with the softer capital spending seen in the prior months. The stronger headline cash earnings in Jan looks to be temporary in our view as the job market, while remains tight has recently flashed signs of weaknesses

Australia services sector hit by Covid-19: Australia AiG Performance of Services Index slumped deeper into contraction area at 44.0 in February (Jan: 44.7), its third consecutive month of sub-50 reading to signal an even larger fall in Australian services activity. This reflects the impact of travelling bans and general aversion to travelling on the inbound tourism sector amid the Covid-19 outbreak.  

Australia retail sales dropped before Covid-19: Adding to the bad news was the larger-than-expected fall in January retail sales. Retail sales dropped 0.3% MOM while Dec contraction was revised further down from – 0.5% to -0.7% MOM. Analysts had been expecting sales to be flat. Dec and Jan prints reflected the effect of bushfire, before the acceleration of the Covid-19 spread in China that led to travelling bans, suggesting that retail sales could fall further in Feb and March onwards. 

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

  • EURUSD:  1.1100 (EUR943mn); 1.1175 (EUR827mn); 1.1180 (EUR476mn); 1.1200 (EUR386mn); 1.1205 (EUR927mn)
  • USDJPY:  105.00 (USD457mn); 106.00 (USD506mn); 106.25 (USD260mn); 107.50 (USD732mn)
  • AUDUSD: 0.6550 (AUD322mn); 0.6600 (AUD429mn); 0.6605 (AUD300mn)

Technical & Trade Views

EURUSD (Intraday bias: Bullish above 1.11 Bearish below)

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EURUSD From a technical and trading perspective, as 1.11 supports intraday look for a challenge of year to date highs and offers and stops above 1.1250, this area should prompt some profit taking and a pause that could see a deeper correction ensue to test bids back towards 1.1050/00.UPDATE new year to date highs achieved as 1.12 supports intraday look for a test of offers and bids to 1.13. On the day only a close sub 1.1150 would suggest a pause in the grind higher

GBPUSD (Intraday bias: Bullish above 1.29 Bearish below)

GBPUSD From a technical and trading perspective, bears frustrated again as discussed in yesterday’s Chart of The Day,  as 1.2860 offers eroded, as 1.2800/20 supports look for a test of pivotal 1.2900/20 resistance, sustained trade above here opens a move to test descending trendline resistance above 1.30 UPDATE testing pivotal descending trendline resistance a close above 1.2960 today will encourage bullish spirits to challenge offers and stops above 1.30 on the day only a close sub 1.2860 will concern the bullish bias

USDJPY (intraday bias: Bearish below 107.50 Bullish above)

USDJPY From a technical and trading perspective, prices sliced through the pivotal test of daily ascending trendline support and duly exposed bids and stops to 107.50, as 108.60 caps upside attempts bears look for a 106.50 test next, on the day only a close above 109.00 would delay further downside and set a base for further corrective action UPDATE as busted 107.50 support now acts as resistance look for a test of 104.50 2019 lows 

AUDUSD (Intraday bias: Bearish below .6650 Bullish above)

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AUDUSD From a technical and trading perspective  the spike below .6500 has attracted bids early in the week a close back through the .6600 handle would suggest the potential for a more sustained correction targeting .6700. A failure to carve out a meaningful low here will open .6350 downside test next UPDATE price continues to test pivotal descending trendline resistance a close through 6650 would encourage further corrective upside to challenge offers and stops above .6700. On the day only a close back below .6560 would suggest the correction is complete and a resumption of trend is underway

 

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

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