Coronavirus Fear Continues as Confirmed Cases Surge, Forex Markets Taking a Breath

Market overviews

Risk aversion continues in Asian markets as outbreak of China’s coronavirus shows now sign of slowing. But the moves in the currency markets seem to have passed a climax. Commodity currencies are consolidating in tight range close to week lows now. Yen, Swiss and Dollar are also digesting some gains.

Technically, EUR/AUD’s break of 1.6294 resistance suggests resumption of rise from 1.5962. Further rise should be seen to 1.6432 resistance first. AUD/JPY’s break of 73.76 support should confirm another rejection by 76.28 resistance. More downside is now in favor back to retest 69.95 low. CAD/JPY’s break of 82.80 support this week also suggest near term bearish reversal. Further fall should be seen to 81.28 support next.

In Asia, Nikkei closed down -0.55%. Japan 10-year JGB yield is up 0.0123 at -0.035. Singapore Strait Times is down -2.47%, catching up after holiday. China and Hong Kong markets are closed. Overnight, DOW dropped -1.57%. S&P 500 dropped -1.57%. NASDAQ dropped -1.89%. 10-year yield dropped -0.076 to 1.605. It’s on track towards 1.429 low at a later stage.

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China’s coronavirus case jumped to 4515, death toll at 106

According to latest update from China’s National Health Commission, confirmed cases of coronavirus in China jumped to 4515 as of January 27, up from 2835 reported a day earlier. Death toll also rose to 106, up from 81.

The coronavirus also continues to spread to other places in the world. Germany has confirmed the first case late on Monday, in the town of Starnberg, 30km southwest of Munich. The health department said the patient is in “good condition” and isolated under medical observation. Also, “people who have been in contact (with the patient) have been informed in detail about possible symptoms, hygiene measures and transmission channels.”

The US Centers for Disease Control said yesterday that the number of “patients under investigation” in the U.S. has almost doubled from the 63 reported on Thursday, to 110. The agency  increased its travel warning for all of China, asking people traveling to practice “enhanced precautions.”

Japan Nishimura warns of economic risks from China coronavirus outbreak

Japan’s Economy Minister Yasutoshi Nishimura warned of the economic impact of China’s coronavirus outbreak today. He said at a news conference, “there are concerns over the impact to the global economy from the spread of infection in China, transportation disruptions, cancellation of group tours from China and an extension in the Lunar Holiday”.

“If the situation takes longer to subside, we’re concerned it could hurt Japanese exports, output and corporate profits via the impact on Chinese consumption and production,” he added.

Released from Japan, corporate service price index rose 2.1% yoy in December, matched expectations.

Australia NAB business confidence dropped to -2, lowest since mid-2013

Australia NAB Business Confidence dropped to -2 in December, down from 0, hitting the lowest level since mid-2013. Business Conditions rose 1pt to 3. Trading condition dropped from 6 to 5. Profitability condition dropped from 3 to 1. Employment condition was unchanged at 4.

Alan Oster, NAB Group Chief Economist: “At present there appears to be a relatively large divergence between confidence and conditions, and we will continue to watch the survey to see how this resolves. Though, if confidence and forward orders remain weak, it is likely that the early part of 2020 could see further deterioration in the growth momentum (especially in private sector demand). We think that more policy stimulus will be needed to boost the economy over 2020”.

Looking ahead

Swiss will release trade balance. UK will release CBI realized sales. But major focus will be on US durable goods and consumer confidence.

EUR/AUD Daily Outlook

Daily Pivots: (S1) 1.6211; (P) 1.6263; (R1) 1.6352; More…

EUR/AUD’s break of 1.6294 resistance suggests resumption of rise from 1.5962. Intraday bias is back on the upside for 1.6432 resistance first. Break there will pave the way to retest 1.6785 high. On the downside, break of 1.6106 support is now needed to confirm completion of the current rally. Otherwise, near term outlook will remain bullish in case of retreat.

In the bigger picture, as long as 1.5894 support holds, outlook remains bullish. Firm break of 1.6786 will resume up trend from 1.1602 (2012 low). Next upside target is 61.8% retracement of 2.1127 (2008 high) to 1.1602 at 1.7488. However, sustained break of 1.5894 will have 55 week EMA (now at 1.6082) firmly taken out too. That should indicate medium term topping and target 1.5346 key support next.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:50 JPY Corporate Service Price Index Y/Y Dec 2.10% 2.10% 2.10%
0:30 AUD NAB Business Conditions Dec 3 4
0:30 AUD NAB Business Confidence Dec -2 0
7:00 CHF Trade Balance (CHF) Dec 3.34B 3.92B
11:00 GBP CBI Realized Sales Jan 5 0
13:30 USD Durable Goods Orders Dec 1.20% -2.10%
13:30 USD Durable Goods Orders ex-Transport Dec 0.40% -0.10%
14:00 USD S&P/CS Composite-20 Home Price Y/Y Nov 2.40% 2.20%
15:00 USD Consumer Confidence 128.2 126.5