Our expectations for today’s European session remain reserved. The lack of risk appetite is indicated by the still looming possibility of a worsening situation with the deadly virus that has left China and has already been observed in neighboring countries. The virus has so far been detected in 571 patients, with 17 deaths so far, leaving 95 people in critical condition.
Responding to the threat of further proliferation, the Chinese government has completely blocked the city of Wuhan – access to logistics and transport has been cut off, with more than 11 million people living in the hearth. The WHO is having a meeting again today to reveal more details about the situation, decide whether to declare a global pandemic and propose their own strategy for action.
Despite the calendar today for Europe, where we have an ECB report, interest rate decision and press conference, investors remain focused on the situation in China. It is perfectly normal for us to monitor the outflow of risky assets.
The futures of the European indices point to a weaker opening, the most evident being the decrease in DAX, which reached ATH yesterday and started to form a double peak. The development of price action will be interesting, which will give more clarity to the market participants whether there is a deeper correction. Sentiment, of course, will be key. The area at 13442 is strong resistance, limiting the depreciation.
The US dollar is still retreating from the yen, with its appreciation being due precisely as a safeguard asset at this troubled time, with the currency pair currently reaching key resistance in the area at 109,590. The euro remains weak against the US dollar, stuck in a range between 1.10796 and 1.11000. We have positioning before the ECB today. The Swiss franc remains weak against the US dollar after Switzerland was declared a currency manipulator yesterday because of the frequent (even hidden) interventions made by SNB in the currency markets. Despite the risk off sentiment, the currency remains under pressure. After B.J. managed to push his deal through the UK Parliament yesterday and was accepted into law by the Queen, the pound jumped 0.80%. Although retreating from the area at 1.3165, we would expect the retreat to be temporary. Resistance remains at 1.31216.
WTI and BRENT kicked off the day with declines after API data showed a potentially larger national oil inventory, and Goldman Sachs warned that the virus crisis would disrupt flights, leading to lower oil consumption and a fall in the cost of oil. $ 3 WTI. The price calculates exactly this effect, and with the passage below $ 57 (the 200-day moving daily area) per barrel, the sale has intensified. We expect this to continue until 55.30 – 55.20.
Gold remains in the narrow range despite the escape to safe heaven assets, holding at 1558 ounces. The formation of a potential bullish daily flag could lead to a rise in the value of precious metal to levels of 1570-73.
Trader Martin Nikolov