Daily Market Outlook, March 17, 2020

Daily Market Outlook, March 17, 2020

Daily Market Outlook, March 17, 2020

forex guide

Asian market is once again mostly down following yesterday’s fall on Wall Street which was the largest one-day decline since 1987. However, today’s declines are more modest and futures prices currently point to a rebound in US equities. US President Trump warned that the virus outbreak could last for months and may drive the US economy into recession. However, G7 leaders pledged to do ‘whatever is necessary’. Following yesterday’s updated guidance from UK PM Johnson, Chancellor Sunak will today announce further measures to help cushion the economy.

Dow plunged nearly 3000 points as global central bank actions failed to sooth the market. After the Fed’s and RBNZ’s emergency rate cuts, the BOJ had followed up with an emergency policy announcement of its new and additional easing measures while the BOK also made a 50 basis point cut in its benchmark rate. Stocks fell around 8-10% at opening in the US triggering another circuit breaker that halted market-wide trading, its third time for the past two weeks. The Dow Jones tumbled nearly 3000 pts (-13%) at the end of the day, its second worst day in history while the S&P 500 and NASDAQ lost 12%. 

Treasury yields collapsed around 13-25bps alongside higher JPY as the flight to safety intensified; Gold price however eased further to $1514.10/barrel. Crude oil prices lost ground, tumbling around 10-11% – Brent crude closed at $30.05/barrel while WTI closed below $30/barrel. In the FX market, the USD strengthened against most of the majors and the sell-off in EMs continued

BOJ ramped up stimulus to fight Covid-19: The Bank of Japan brought forward its meeting to yesterday and announced its highly anticipated policy decision following the Federal Reserve and RBNZ’s emergency rate cut on the same day. The BOJ left its benchmark policy balance rate unchanged at – 0.1% and maintained its 10Y yield target and at the same time, reaffirmed its current guidance of 80 trillion annual purchase of JGBs. To ramp up stimulus, it introduced (1) a special fund to provide loans to banks at 0% interest rates to facilitate corporate financing, (2) raise the target of corporate bonds and commercial papers holdings to ¥4.2trillion and 3.2trillion (3) Double the purchases of ETF and J-REITs. BOJ joined global central banks to counter the economic impact of Covid-19 that happened much earlier in Japan. Governor Haruhiko Kuroda said in a press conference that the impact of the virus is expected to continue for some time and the central bank would consider additional monetary easing to deal with it. Japan’s economy had contracted in 4Q19 due to an early October typhoon and a sales tax hike that had curbed consumption. Persistently low inflation is plaguing the economy and earlier signs of labour market weakness are worrying. The postponement/cancellation of the Tokyo Summer Olympic would be a huge blow to the country. 

In the Eurozone, the German ZEW survey will provide one of the first indications of economic activity in March when virus concerns gathered pace. As a survey of financial analysts the ZEW is probably less useful than other gauges such as the PMIs which collect responses from businesses. However, it tends to be watched because of its timeliness and the expectations component has often proved to be a helpful leading indicator. Today’s update is expected to show sizable falls in both current conditions and expectations. 

The timeliest of today’s wedge of US data is the March NAHB housing market index. It has picked up sharply over the last 12 months. However, the March reading is expecting to have edged down for a third successive month. US retail sales would normally generate a lot of market interest but the February reading will probably be seen as a dated indication of current consumer trends. However, one note of interest will be whether it shows any early indication of households stockpiling necessities. 

Three more US states are set to hold primaries today (Ohio the fourth has postponed) to vote on who should be the Democrats’ nominee in November’s Presidential election. Polls suggest that Former Vice President Biden should further increase his lead. 

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

  • EURUSD:  1.1100 (230M), 1.1120-25 (330M), 1.1130 (230M), 1.1180-85 (260M)
  • USDJPY:   106.00 (460M), 106.65-75 (1.5BLN), 108.00 (500M)

Technical & Trade Views

EURUSD (Intraday bias: Bearish below 1.12 Bullish above)

  Chart of The Day EURUSD

EURUSD From a technical and trading perspective, price pulled back sharply to test pivotal 1.1050/30 support which represents symmetry swing and Fibonacci 61.8% retracement of the February advance, as this level supports there is a window for another leg higher to develop. The next leg up will be confirmed with a daily close above the near term VWAP at 1.12 UPDATE while price struggle to reclaim 1.12 it appears a test of the pivotal 1.0950 may be underway a failure to find support here will see a quick retest of Year To Date (YTD) lows. A close above 1.12 still needs to get constructive on the pair again

GBPUSD (Intraday bias: Bearish below 1.24)

GBPUSD From a technical and trading perspective, the inverse head and shoulders scenario discussed in last week’s Weekly Market Outlook appears to be negated, unless price can stage an impressive key reversal pattern today closing above Friday’s highs then it appears price looks poised to make a rund to test bids and stops below 1.20 the pivot cluster and 2019 lows towards 1.1950

USDJPY (intraday bias: Bearish below 109.50 Bullish above)

USDJPY From a technical and trading perspective, anticipated upside correction extends to test the equidistant swing objective sighted at 107.96, as 108.50/109 prior trend line support no acts as resistance there is a window for another leg lower to develop to retest prior swing lows a close sub 106 will flip the daily chart bearish again as per the near term VWAP

AUDUSD (Intraday bias: Bearish below .6200 Bullish above)

AUDUSD From a technical and trading perspective as .6300 contains upside attempts look for a test towards the support cluster towards the psychological .6000 level (equidistant swing and pivot cluster) UPDATE .6000 test underway a failure to produce a bullish reversal pattern here will see further losses to the next cluster magnet sub .5800

 

  EUR/USD: plan for the European session on Feb 7, 2020 - Forex Alchemy

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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