Markets spooked by jump in South Korean & Japanese coronavirus cases
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Thu Feb 20, 10:38AM CST

ANALYSIS

USDCAD

Coronavirus fears are back after the number of new cases soared to 104 in South Korea and 92 in Japan today, after both nations reported their first deaths from the virus, and after the mayor of Daegu, the South Korean city afflicted by the latest surge in new cases, asked its citizens to refrain from venturing outdoors. Chinas National Health Commission reported just 45 new coronavirus cases outside of Hubei province, which now extends the declining daily trend of this statistic to 16 days, but they took another knock to their credibility last night by changing the definition of what constitutes a confirmed case once again by removing clinically diagnosed patients with negative Rna test results. The official case count has risen to 74,577 in China and there have now been 2,119 deaths, but a quick survey of market chatter this morning suggests that nobody believes this data anymore. We havent believed it from the very beginning of this outbreak, and we think markets are finally starting to focus on the relatively more trustworthy data coming out from neighboring nations like Singapore, Japan, Thailand, South Korea and Malaysia...which is trending in the wrong direction. Seeherefor an excellent source (BNO News) that tracks the number of cases and deaths in China and the rest of the world.

Todays coronavirus reality check has finally took a chink out the armor for the Chinese yuan. After staying bid above the 7.0000 level for the betterment of two weeks while China threwthe kitchen sink at creating positive news flow, the yuan has now collapsed lower. The influential off-shore USDCNH rate hasbroken higher out of its downtrend since the summer of 2019; a technical development which we warned about on Tuesday. Seehere. The resulting risk-off tone from this yuan move unsurprisingly hit commodity currencies in overnight trade and sawUSDCAD roar back to Tuesdays pivotal chart resistance level in the 1.3260s.

The US Philly Fed survey for February was just released however it has taken the upward momentum out of the broader USD. While the headline index figure came in at a whopping 36.7 vs 12.0 expected, largely because of a surge in new orders, both the employment and prices paid sub-components missed expectations. A NY close for USDCAD above the 1.3265 level would do much to restart the markets uptrend whereas a move back below the 1.3220s would be a negative technical development. Canada reports its December Retail Sales data tomorrow at 8:30amET.

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USDCAD DAILY

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USDCAD HOURLY

MAR CRUDE OIL DAILY

MAR CRUDE OIL DAILY


EURUSD

The release of the US Philly Fed survey is leading to a bounce off familiar chart support in EURUSD this morning, perhaps because the broader USD failed to extend higher on the headline beat. One could make the argument that the internals of the report were more mixed in tone, with the beat on the new orders index getting somewhat diminished by the misses on the employment and prices paid indexes.

We think the markets downward momentum could stall today if the 1.0790-1.0800 support zone survives another downside re-test. Tomorrow should be big day for EURUSD as well get the pan-European flash PMIs for February around the 3:30-4:30amET hour.Traders are expecting Manufacturing reads of 44.8 vs 45.3 prev for Germany and 47.5 vs 47.9 prev for the Eurozone. Estimates for the Services PMIs are 53.8 vs 54.2 prev for Germany and 52.2 vs 52.5 prev for the Eurozone.

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

APRIL GOLD DAILY

APRIL GOLD DAILY


GBPUSD

Sterling is cascading lower today after yesterdays hotter US PPI data gave the shorts some fundamental ammunition to challenge chart support in the 1.2940-50s. This level ultimately fell into the London close and its been a slippery slope down for GBPUSD ever since.

The UK reported a moderately better than expected Retail Sales report for January today (+0.9% MoM vs +0.7%), but this is a notoriously volatile data set and an unreliable indicator of consumer consumption according to many analysts. Tomorrow should be a big day for GBPUSD because the pan-European flash PMIs for February will feature the UKsdata setas well. Traders are expecting 49.7 vs 50.0 prev for Manufacturing and 53.4 vs 53.9 prev for Services.

GBPUSD DAILY

GBPUSD DAILY

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GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

The Australian dollar is trading at new 11-year lows this morning after Australias latest employment report showed an unexpected rise in the unemployment rate. While headline job growth mildly beat expectations for January (+13.5k vs +10k), the rate of those unable to find work increased to 5.3% from 5.1% in December, and the rate was 0.1% higher than the consensus estimate of 5.2% for January.

We said yesterday how a weaker than expected employment report could be the catalyst for new lows in AUDUSD and it appears we got that, and then some. The market is now clinging to trend-line extension support in the 0.6610s as traders observe the post Philly Fed decline in the broader USD. March 3rdrate cut odds in the OIS market havent budged from 4% today though, which suggests the move lower since Asia has been more risk-off/coronavirus driven.

AUDUSD DAILY

AUDUSD DAILY

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AUDUSD HOURLY

USDCNH DAILY

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USDJPY

Dollar/yen is continuing its surge higher today as renewed coronavirus fears focus on Japans jump in new cases and two reported deaths. We also think theres growing concern that this summers Tokyo Olympic Games will be negatively affected, if we look at the Tokyo Marathons announcement that it willbe cancelling its mass race on March 1st due to the coronavirus. We felt alone yesterday in our sell everything Japan theory behind the markets latest rush to sell yen but we think it was justified. There was more to yesterdays price action than simply risk-on and we think todays continued rise in USDJPY proves that point. What is more, the yen should be trading higher in todays global risk-off environment, but its not.

The market stalled at trend-line extension resistance in the mid-111s yesterday, but since this level has now given way wed say the longs are still in charge until the mid-112s.

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BUND YIELD DAILY

US 10YR BUND YIELD DAILY

Charts: Reuters Eikon

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