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Morning wrap

  • US indices finished yesterday’s session at fresh record highs. S&P 500 added 0.84% and closed above 3300 pts for the first time in history. Dow Jones gained 0.92% and Nasdaq surged 1.06%

  • Chinese data for December showed that industrial production grew by 6.9% YoY (expected 5.9%),  retail sales increased 8% YoY (expected 7.9%) and fixed asset investments jumped 5.4% YoY (expected 5.2%). GDP growth of 6% in Q4 2019 was in-line with estimates. Full-2019 GDP growth reached 6.1%, slightly below an estimate of 6.2%

  • Release of solid data from China boosts sentiment during the Asian session. Nikkei finished 0.45% higher and S&P/ASX 200 added 0.32%. However, Chinese indices trade mixed.

  • NZD is the top gainer among majors on Friday morning while JPY is the biggest laggard. Precious metals advance along base metals while oil trades flat.

  • Donald Trump plans to nominate Judy Shelton and Christopher Waller to the Federal Reserve. Both economists are considered doves

  • Nonpartisan government watchdog said that the White House broke the law by withholding aid to Ukraine that was appropriated by the Congress

  • Phil Hogan, EU trade commissioner, said he did not discuss US tariffs on cars during his visit in Washington

  • US Treasury will start issuing 20-year bonds in the first half of 2020

  • It is said that 11 US soldiers were injured in Iranian missile attack last week

In spite of Chinese data being quite solid, CHNComp is sliding today. The index is struggling near the resistance zone marked by 78.6% Fibo level (11425 pts). 

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GBPUSD pulls back below 1.31 after retail sales miss

9:34 AM January 17, 2020

Retail sales data for December from the United Kingdom was released at 9:30 am GMT. Headline print showed a drop of 0.6% MoM (exp. +0.6% MoM) while gauge excluding fuel slipped 0.8% MoM (exp. +0.8% MoM). The reading boosts already high market odds for BoE rate cut on January 30. GBPUSD pulled back below 1.31 after the release.

GBPUSD pulled back below 1.31 handle following release of dismal retail sales data. The pair is making a major dive and near the 200-session moving average (purple line)

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Morning wrap

  • Oil is the top market mover after the weekend. Brent and WTI trade over 1% higher following supply disruptions at two major producers. Unrest in Iraq has caused the country to shut down production at its biggest oil field while armed forces have seized control over crucial export ports in Libya

  • Majority of blue chip indices trade higher during the Asian session. Nikkei closed 0.18% higher and S&P/ASX 200 added 0.22%. However, HSCEI is trading around 0.6% lower at press time

  • GBP is the worst performing G10 currency today. Sterling drops after the UK Chancellor of the Exchequer said that his country will not stay close to the EU after Brexit. Safe haven currencies like JPY and CHF are also underperforming today

  • Precious metals trade higher with platinum enjoying strong gains. Bulls dominate trading on base metals as well

  • UK Prime Minister Boris Johnson will not attend the World Economic Forum in Davos this week

WTI (OIL.WTI) bounced off the intersection of 50- and 200-session moving averages (green and purple lines). Commodity catches a bid at the beginning of a new week, thanks to supply disruptions in Iraq and Libya. The nearest resistance can be found at $61

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Technical alert: AUDUSD

AUDUSD launched a new week slightly lower. Looking at the daily time frame, the pair is trading near the key support at 0.6850. A rebound from the area marked with green colour may hint at the pair returning to an upward trend. In such a scenario, the nearest resistance to watch can be found at 0.6930 handle, where sellers took over last week. On the other hand, a break below the aforementioned support at 0.6850, could pave the way for a bigger downward move and 0.6755 handle could be at risk.

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Morning wrap

  • Risk-off moods could be spotted during the Asian trading hours as market took note of spreading coronavirus in China

  • 4 people have died from the virus while 200 are said to be affected. The virus has spread to Beijing and abroad to Thailand and Japan. WHO is said to have called an emergency meeting on the issue. New Year holiday poses a significant threat of launching an epidemy as Chinese people will travel all across the country to meet their relatives

  • Stocks decline in Australia, Japan, South Korea and China. Chinese stocks experience the biggest losses. Risk-off moods can also be spotted on the FX and commodity markets with JPY, CHF and precious metals trading higher

  • Riskier assets like oil, industrial metals and AUD are taking a hit

  • As expected the Bank of Japan left interest rates unchanged. However, the Bank decided to boost growth forecast from 0.7% to 0.9% (for the 12-month period starting in April)

  • Emmanuel Macron and Donald Trump agreed on a truce in the dispute over digital taxes. Neither country will impose punitive tariffs on the other until the end of a year

  • The International Monetary Fund expects global growth to pick up from 2.9% in 2019 to 3.3% this year. However, it still marks a decrease from October’s forecast of 3.4%

  • The Italian Senate gave a green light to start a prosecution of League party chief, Matteo Salvini. Salvini is to be prosecuted over his refusal to allow migrant boats to dock in Italian ports

USDJPY is pulling back from the topside resistance of the upward channel. The pair is reacting to a rise in risk-off moods related to Chinese virus. The first near term support can be found at 109.60 handle, that served as a ceiling between late-November 2019 and early-January 2020

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Morning wrap

  • US indices finished yesterday’s session mixed. S&P 500 gained 0.03%, Nasdaq added 0.14% while Dow dipped 0.03%. Tesla rallied 4.09% yesterday, surpassed $100 billion market cap and became the world’s second largest car manufacturer

  • Risk-off moods returned to Asian exchanges after Chinese officials decided to halt travel from Wuhan, a city of 11 million people where the coronavirus first emerged. The death toll has risen to 11. Nikkei closed 0.98% lower while S&P/ASX 200 dropped 0.63%. Most of the Chinese indices trade over 3% lower

  • Japanese yen is gaining against all major peers as moods remain downbeat. However, gold and silver failed to rally on the situation and both trade lower

  • Crude oil extends losing streak adding another massive drop today. Brent trades 1.6% lower while WTI slides 1.9%. Bears dominate on base metals market as well

  • Trump maintained pressure on the EU and UK yesterday in a bid to sign crucial trade deals ahead of November’s elections. However, UK Chancellor of the Exchequer stressed that EU deal comes first

  • Reuters reports that Ursula von der Leyen may travel to Washington next week

  • Boris Johnson’s Brexit deal made it through the Parliament with Lords expressing their support yesterday. Now the bill is await signing into law by Queen Elizabeth II

  • Luigi di Maio, leader of the Five Star Movement, resigned from the party chief position. He said that he has completed his task and that Italy’ largest party needs an overhaul

  • Aussie gains after jobs report for December showed unemployment rate dropping to 5.1%. Employment grew by 28.9k

  • Japanese exports dropped 6.3% YoY in December, extending a losing streak to a 13th month. Exports of cars and car parts took the biggest toll on the reading

OIL nosedives for another day and eyes a test of the support zone ranging below $61 handle. Potential hit to demand in response to coronavirus outbreak is the reason behind a drop

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Daily Summary: Virus overshadows boring ECB

  • Coronavirus spreads, makes markers nervous
  • ECB stays put, EURUSD dives lower
  • Oil prices down, recover somewhat after the inventory data
  • Firday’s PMIs key for investors

Markets are down on Thursday from Asia to the US as investors become concerned with consequences of the Chinese virus that has killed at least 17 in China but has also been already detected in the US and UK. The Chinese decided to close Wuhan metropolitan area and travel limitations will deal a clear hit to the economy days before the start of the Lunar New Year. Obviously, the more the virus spreads, the broader consequences it might have globally, just when the economy looked to start stabilizing.

Wall Street and DE30 hit fresh all time highs just yesterday but today the moods are much darker. While the losses in the US are moderate (US100 is actually close to zero, US30 slides by 0.5%), Europe is deeper in the red with DE30 down 0.7% and RUS50 (due to sinking oil prices) 1.5% lower. A false breakout on DE30 yesterday might be very costly unless bulls regroup soon.

We finally see some moves on the FX market, as the Japanese yen storms higher amid risk aversion. The ECB was technically the event of the day but it didn’t offer many hints regarding the future policy other than Lagarde opening the door very very slightly to more asset purchases. That was enough to trounce euro lower and EURUSD sunk to 1.1040, the lowest level this year. EURJPY slid by 0.9% and GBPJPY as the Queen signed the Brexit bill. Ugly trade data from Japan (Japanese exports declined in y/y terms in EACH of the months in 2019) had little impact as risk aversion flows dominated the market.

Is the bullish trend over? GBPJPY has painted a full bearish reversal on the D1 chart. Source: xStation5

Oil continued to sink as the virus could hurt oil demand. Brent oil (OIL) slid below $61 for the first time since 3 December but recovered slightly after the US inventory data showed a smaller build of gasoline stocks and a draw of distillates.

Friday will be crucial from the macroeconomic perspective as we will get flash PMIs from Japan, Europe and US. We are sure that the virus will draw the most attention but unless the economy improves (as investors hope) this correction could get much uglier.  

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Risky assets take a hit as virus concerns mount

Coronavirus continues to be the main market theme with the death toll rising to above 80 over the weekend. Risky assets like stocks and oil launched the week with massive declines. Nikkei (JAP225) is trading 2% lower while WTI (OIL.WTI) takes a 2.3% dive.

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Morning wrap

  • Death toll from a new coronavirus has risen to over 80 and markets remain jittery. Number of confirmed cases has risen to 2700. More and more countries considered limiting entrance for visitors from Chinese Wuhan city, where the virus was first reported

  • Stocks in Asia take a hit with Nikkei closing 2.03% lower. Chinese stock exchanges were shut for Lunar New Year while equities in Australia did not trade due to Australia day

  • Oil takes another major hit from coronavirus concerns and is trading over 2% lower. Crude is quoted at the lowest level since mid-October 2018. Precious metals benefit from risk-off moods with gold and silver gaining around 0.5%

  • JPY and CHF are top gainers among G10 currencies while AUD and NZD lag the most. However, it should be noted that liquidity during Asian trading hours was thin as traders from China and Australia took a day off

  • The US embassy building in Iraq was hit by rockets on Sunday. There are no official reports on casualties and markets seem to be focused on coronavirus threat

  • Italian centre-left bloc, led by the Democratic Party, is said to have won local elections on Sunday in a blow to League’s Salvini

  • Times of London reports that UK Prime Minister Johnson may impose tariffs on EU and US goods in order to accelerate trade talks. French cheese and German cars were named as potential targets

WTI (OIL.WTI) remains under pressure as traders remain afraid of a potential hit to oil demand. Crude trades at the 3-month low and nears key support zone ranging around $52 handle.

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The U.S. dollar rose to 2-month highs

Last week, investors remained cautious and tended to buy U.S. dollars, whose value peaked since early December 2019. There has been no major change in the political arena and the market was led by a general risk sentiment among market participants.

USD

U.S. economic data was relatively positive. Preliminary manufacturing PMI index, released Friday by Markit, showed a decline from 52.4 points to 51.7 points, but remained within the expansion area. Existing home sales in December were 5.54 million units a year, above analyst expectations of 5.35 million. Overall, the residential market is showing recovery, following a slowdown in early 2019, as lower interest rates and rising house prices have boosted buyer activity. The number of new unemployment applications reached 211 thousand and was relatively stable compared to last week.

Euro

The main currency pair EUR/USD reflected the appetite for market risk and thus recorded a slight depreciation. Christine Lagarde, head of the European Central Bank, said at a press conference that members see further economic growth in the Old Continent, but voiced doubts about the rate of inflation, which remains slightly above 1.0% and is lagging behind targets. The head of the central bank also spoke about the internal review of monetary targets for the first time since 2003. Ms. Lagarde said a specific date by which a decision would have to be made is not yet available and the necessary market analysis is being carried out. A meeting of bank members was held on Thursday, but monetary policy and interest rates remained unchanged. Among the economic data, the preliminary manufacturing PMI index was 47.8 in Europe and 45.2 in Germany, showing improving sentiment among business participants. The ZEW Economy Index was also released, rising to 25.6 in Europe and 26.7 in Germany, which sent the most positive sentiment from the end of 2015. EUR/USD pair closed weekly trading depreciating -0.6% during the week.

JPY

The key Asian pair, USD/JPY has depreciated, driven by investors’ demand for safe assets as market participants chose the Japanese yen. Higher-than-normal demand has been triggered by the outbreak of the Corona virus in China, as investors became worried about a possible larger-scale epidemic and its impact on economic growth. The Bank of Japan held a monetary policy meeting, but the interest rate and the stimulus program were unchanged. Economic data included the country’s export volume, which declined 6.3% over the year, reflecting a slowing industrial sector. The preliminary manufacturing PMI index increased from 48.4 to 49.3, but remained in negative territory. December inflation stood at 0.8% per year. USD/JPY has ended the trading week depreciating -0.8%.

GBP

The British pound depreciated slightly against the U.S. dollar. There was no major political news. Among economic indicators, there was preliminary manufacturing PMI, which rose to 49.8 points, while wages increased by 3.2% per year, reflecting good market conditions, especially when unemployment is barely 3.8%. GBP/USD has ended the week appreciating +0.5%.

Economic Events

This week will begin with Germany’s Ifo Economic Sentiment Index, followed by new U.S. home sales. U.S. industry order results and consumer confidence index will be released on Tuesday. On Wednesday, the focus will be on the U.S. central bank meeting and interest rate decision. Bank of England will hold a meeting on Thursday, while Japanese industry data and a Chinese managers purchasing index will be released on Friday.

According to Admiral Markets market sentiment data, 79% of investors have long positions in the EUR/USD pair (increased +7 percentage points compared to last week). In the main Asian pair USD/JPY, 52% of investors have long positions (up 32 percentage points). In GBP/USD, 47% of participants expect a rise (down 8 percentage points). Such market data is interpreted as contraindicative, therefore appreciation is likely in GBP/USD pair and depreciation in USD/JPY and EUR/USD pairs. Analysis of positioning data should always be accompanied with fundamental projections and technical analysis.

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Morning wrap

  • US indices slumped yesterday as investors were assessing the impact of a coronavirus outbreak. S&P 500 and Dow Jones finished 1.57% lower while Nasdaq declined 1.89%. However, US futures trade higher in the morning.

  • Equities in Asia are still feeling pain from the virus concerns with Nikkei closing 0.55% lower. Investors from South Korea and Australia returned from holiday and indices from the two countries are trying to make up for yesterday’s lack of session – S&P/ASX 200 declined 0.53% while KOSPI slumped 3.05%.

  • China said that the number of confirmed cases grew to 4515 and that the death toll has risen to 106. About a fifth of Chinese patients with confirmed virus is said to be in serious or critical condition. The first coronavirus case has been confirmed in Germany.

  • Situation on the oil market has stabilized with Brent holding firm near $58.50 handle and WTI trading near $53 mark. OPEC is considering production cuts to make up for price slump caused by virus concerns

  • Safe haven assets like JPY, CHF or precious metals are taking a step back today. CAD and NOK are the top performers among majors but it should be noted that the scale of moves is minor. EM currencies, especially MXN and ZAR, are catching a bid as well

  • Prime Minister of New Zealand announced that the general elections will be held on September 19

  • According to the Bloomberg report, Singapore is set to introduce new payments legislation that will allow global cryptocurrency companies to expand into the country. Operating licenses for those firms will be issued

Korean index (KOSP200) took a major dive today as it tried to make up for a lack of the session yesterday. However, the drop was halted at the lower limit of the Overbalance structure, offering some hope to the bulls.

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Morning wrap

  • US indices enjoyed strong gains yesterday as investors looked past virus concerns. S&P 500 finished 1.01% higher, Dow Jones added 0.66% and Nasdaq rallied 1.43%

  • Upbeat moods also can be spotted on the Asian markets where S&P/ASX 200 gained 0.53% and Nikkei closed 0.71% higher. Hong Kong index declines over 3% as it was closed during recent declines and opened just today. European stock market futures point to a green open.

  • Number of confirmed coronavirus cases in China increased to almost 6 thousand. Death toll increased to 132. Number of new cases reported today is smaller than the one reported yesterday

  • Australian dollar is the best performing G10 currency after Q4 inflation report showed headline price growth at 0.7% QoQ (expected 0.6% QoQ). Odds for RBA rate cut in February decreased

  • The US government is allegedly considering banning flights to China as an option of fighting the spread of coronavirus

  • API estimates pointed to a decline in oil inventories and gave crude price a lift. Brent and WTI are trading over 1% higher in the morning. Precious metals hold steady while base metals advance

  • Apple released a strong earnings report for Q4 2019 yesterday after US markets closed. EPS came in at $4.99 (exp. $4.57) while revenue surpassed $90 billion (+8.9% YoY) for the first time in history

CHNComp plunges today as it reopens after Lunar New Year. The index dipped towards 10600 pts handle and bulls are trying to take over. Return back above 200-session moving average (purple line, 10700 pts) would support buyers from a technical perspective.

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Technical alert: AUDUSD

AUDUSD sinks today above 0.5 percent. From a technical point of view, the downward move has accelerated after a break below the 0.6850 handle. Currently, the zone marked with green colour can be considered a key support. It is a result of previous price reactions from 2019. A rebound from this support may encourage greater upward correction pressure. On the other hand, breaking below this hurdle would be a signal for a bigger sell-off.

AUDUSD D1 interval. Source: xStation5

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Morning wrap

  • Stock market in China reopened after a holiday break. Shanghai index plunges almost 8% after sinking to as low as -9%. Chinese authorities imposed limits on short-selling in order to stop panic. Chinese central bank injected 900 billion yuan of funds through reverse repo operations. Interest rate on those operations was lowered by 10 basis points

  • Declines can also be spotted on the other Asian exchanges but those are much more limited. Nikkei lost 1.01%, Kospi is trading 0.13% lower and S&P/ASX 200 closed 1.34% lower. However, US and European index futures trade higher.

  • Oil is edging lower. OPEC is considering calling an emergency meeting for 8-9 February or 14-15 February. Oil demand in China is said to have declined by around 20% due to coronavirus outbreak

  • Industrial metals and agriculture commodities trade mixed. Precious metals are pulling back

  • UK Prime Minister Boris Johnson threatened to walk away from trade talks with the European Union in case Brussels demand the country to sign up to single market regulations and court system

  • AUD and NZD advance the most among major currencies. GBP, JPY and EUR are top laggards. ZAR gains against USD while other EMs lag

  • Profits of Chinese industrial companies declined 6.3% YoY in December

  • Building approvals in Australia declined 0.2% MoM in December. Market expected a drop of 5% MoM

  • Number of confirmed coronavirus cases in China increased to 17205 while the death toll in the country increased to 361. First coronavirus death has been reported outside of China (Philippines)

WTI (OIL.WTI) launched the week near Friday’s lows. However, crude is trying to recover and attempts to break above the prica zone ranging around $52 handle. The zone will be the key hurdle to watch in case upbeat moods prevail in the European trading hours. 

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Technical alert: EURUSD

Looking at EURUSD chart from a technical point of view, one can see that the buyers managed to halt declines at the key support zone at 1.10 USD. The 1.1024 handle can be considered as the nearest resistance to watch. In case of a bigger upward correction, the next resistance is marked with previous price reactions (1.1035 area). On the other hand, a break below the aforementioned support, could pave the way for a bigger decline.

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Morning wrap

 
  • US indices reached new record highs during yesterday’s session. S&P 500 finished 0.33% higher, Dow Jones added 0.30% and Nasdaq rallied 0.67%. Small-cap Russell 2000 dropped 0.15%

  • Moods in Asia are not as optimistic. Nikkei dropped 0.19% and Kospi declined 1.06%. S&P/ASX 200 finished 0.38% lower. Indices in China decline as well

  • Number of confirmed coronavirus infections in mainland China topped 31 thousand. Death toll has climbed to 636. Number of confirmed cases doubled in Japan after 41 people from the quarantined cruise ship were tested positive for the virus

  • Donald Trump spoke with Xi Jinping on the phone overnight. The two agreed to continue to communicate and cooperate on the virus outbreak. President of China and the US also reaffirmed their commitment to implementation of Phase One trade deal

  • Oil is trading slightly higher in the morning. OPEC expects Russia to respond in a matter of days to its output cut proposal. United States are weighting sanctions on Russian oil giant, Rosneft, for its ties to the Venezuelan President, Nicolas Maduro

  • Precious metals are taking a step back. Majority of industrial metals also trades below the flat line

  • AUD and NZD are G10 worst performers while JPY and GBP hold the lead. USD index sliding a bit

  • Japanese household spending slumped 4.8% YoY in December (exp. -1.7% YoY) while real cash earnings, as expected, declined 0.9% YoY

Korean index (KOSP200) pulls back from the resistance zone at 300 pts. The index painted a lower high and may eye an attack on the support zone at 289 pts. 

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Morning wrap

  • Stocks in Asia are trading lower as investors return their focus to coronavirus outbreak. Nikkei closed 0.6% lower, KOSPI slipped 0.59% and HSCEI is trading 0.5% lower. Australian S&P/ASX 200 finished 0.14% lower.

  • Number of confirmed coronavirus cases jumped over 40 thousand while the death toll has risen to 910. However, the number of confirmed recoveries jumped to above 3300. 60 new coronavirus cases were confirmed among passengers of the quarantined cruise ship in Japan. WHO said it will send advance team to China to inspect coronavirus

  • Reuters reports that Chinese government gave some companies a green light to resume work at production plants in Zhengzhou province

  • People’s Bank of China provided new liquidity measure for country’s biggest banks

  • Australian dollar is the best performing G10 currency on Monday morning while the Japanese yen lags the most. Dollar index declines slightly

  • China’s CPI inflation accelerated from 4.5% to 5.3% YoY in January (expected 4.9% YoY). PPI inflation accelerated from -0.5% to 0.1% YoY (expected 0.0% YoY).

  • Ireland elections ended in a deadlock. Surge in support for nationalists Sinn Fein created a need to form a coalition

  • Oil is trading more or less flat at the beginning of a new week. Azerbaijan Energy Minister said that it is unlikely that OPEC+ will hold an early meeting this month

  • Precious metals are trading flat while base metals advance

WTI (OIL.WTI) plunged below the long-term support zone at $52. However, decline was halted at $50 handle and the commodity is looking for a direction now. It cannot be ruled out that crude will trade sideways between $50 and $52

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New Zealand dollar surges after RBNZ rate decision

 

Reserve Bank of New Zealand left rates unchanged at today’s meeting but signalled that no rate cut is coming this year. NZD caught a bid following the decision and continues to strengthen against other major currencies during European trading hours. NZDUSD is trading 1% higher and is closing in on the 200-session moving average (0.6490). Today’s jump on the pair is also being supported by improving the situation on the bond market.

NZ-US yield spreads have changed in favor of the NZD recently. Source: Bloomberg

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BREAKING: Gold rises as virus victim count soars

The Chinese mysteriously decided to change the methodology of identifying the virus cases and deaths and suddenly there are over 15k of new cases and even more surprisingly 250 new deaths. While markets were increasingly ignoring this theme over the past few days, there were question marks regarding authenticity of the Chinese data. One reaction worth paying attention to is gold where price is moving up using a trend-line. We saw that a similar creep up led to a sharp move higher late in December.  

Source: xStation5

Coronavirus counts soared as the Chinese decided to change “methodology”. Source: worldomteres

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Morning wrap

  • US session yesterday was a volatile one. Major indices opened lower, recovered but ultimately finished slightly lower. Dow Jones plunged 0.43%, S&P 500 dropped 0.16% and Nasdaq closed 0.14% lower. Russell 2000 gained 0.26%

  • Moods in Asia-Pacific region are positive. HSCEI and Kospi gained around 0.45% while S&P/ASX 200 added 0.38%. However, Nikkei closed 0.67% lower.

  • China confirmed 4823 new coronavirus cases in Hubei province using a new testing method. Figure confirms that yesterday’s spike was a one-off event. New China cases outside Hubei declined for the 10th consecutive day while South Korea did not report a new case for a third consecutive day. Death toll has risen to 1491

  • UK Chancellor of the Exchequer, Sajid Javid, resigned yesterday. His deputy, Rishi Sunak, was quickly appointed new Chancellor. However, Prime Minister’s office could not confirmed that budget will not suffer delay

  • CAD and JPY are G10 top performers while CHF is top laggard. Euro is trading slightly lower against USD ahead of European GDP data release

  • Gold trades flat while silver and other precious metals advance. Industrial metals trade mixed with nickel being top laggard. Crude trades slightly higher.

  • Credit Agricole reported higher than expected net income of €1.66 billion for Q4 2019. Revenue from capital markets and investment banking activities increased 50% YoY.

  • NVIDIA reported Q4 adjusted EPS of $1.89 against expected $1.66. Revenue grew 41% YoY to $3.11 billion (exp. $2.96 billion)

In spite of gold trading flat, silver is moving higher today. Precious metal bounced off the support zone at $17.40 and is moving past 50-session moving average today. The nearest resistance can be found 2.5% higher at $18.10.

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