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Dollar Jumped Broadly on Solid Batch of Economic Data, Coronavirus Fears Receded

Dollar ended last week as the strongest one as markets put China’s coronavius behind. Instead, strong risk sentiments lifted major US indices to new record highs. Friday’s pull back was likely due to pre-weekend profit taking only. Latest batch of economic data, including ISMs and NFP, suggested that US economy is in healthy shape. The bullish trend should continue for the near term.

Staying in the currency markets, Australian Dollar ended as the second strongest after RBA affirmed its wait-and-see stands. But any renewed weakness in Chinese stocks and extend selloff in commodity could drag the Aussie lower ahead. European majors were the weakest as UK and EU will now enter into negotiations of future relationship. Risk of cliff-edge Brexit by the end of the year remains.

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US indices resumed record runs, to continue in near term

Major US indices hit new record highs last week before suffering a rather heavy setback on Friday. To us, the pull back was more about pre-weekend profit taking due to the uncertainty over China’s coronavirus. The outbreak is not expected to have serious contagion effect outside of Asia for the moment, even though risks remain. Hence, for now, we’d continue to expect US stocks to perform well if there is no drastic turn in sentiments.

DOW’s up trend is still in progress and prior strong support from 55 day EMA affirms near term bullishness. On sustained trading above 2937362 resistance, DOW is expected to target 61.8% projection of 25743.46 to 29373.62 from 28169.53 at 30412.96 next.

Chinese stock to stay pressured, poised for another decline

The outlook of Chinese stock market is different though. Shanghai SSE gapped down from holiday and dived to as low as 2685.26. Near term outlook remains decidedly bearish despite the strong rebound to close at 2875.96. Strong resistance should be seen around 29000 handle to finish the rebound and bring fall resumption. Decline from 3288.45 should at least have a take on 100% projection of 3288.45 to 2733.92 from 3127.16 at 2572.63 before completion.