Italy, South Korea and Iran in panic mode as number of coronavirus infections explode higher.
Erik Bregar of Exchange Bank of Canada - InsideFutures.com - Mon Feb 24, 11:10AM CST

ANALYSIS

USDCAD

Global markets are looking panicky this morning after the number of new coronavirus infections surged outside China over the weekend. South Korean now has 833 reported cases and 8 deaths versus just 204 on Friday. Italy reported an alarming 223 new cases over the weekend and 7 deaths, leading authorities to effectively lockdown about 50,000 people and cancel public events in 12 villages outside Milan. The outbreak continued to spread in Iran as well, but with an noticeably higher mortality rate (12 deaths amongst 47 infections). All of Irans neighbors (Lebanon, Kuwait, Bahrain, Afghanistan and Iraq) also reported their first coronavirus cases over the weekend as well. Seeherefor the latest updates from BNO News.

All this has led to rising global pandemic fears to start the week. Traders are dumping stocks, crude oil futures, and commodity currencies while flocking to bonds and gold. Dollar/CAD has quickly resumed its uptrend, after teasing traders with bearish price action below 1.3220 support on Friday. The market regained 1.3220s in the final moments of NY trade and theres been a steady bid to the market ever since last nights gap open. Some sellers have emerged at chart resistance just above 1.3300 as traders watch the WHOs latest attempt to calm everybody down, but it appears we could be in store for a long day because theres really nothing else major on the data docket to distract market participants from the reality of the worsening coronavirus situation outside China.

Canada reported higher than expected Wholesale Trade figures for the month of December just now (+0.9% MoM vs +0.5%) and while one could argue this justifies USDCADs pullback off the 1.3300 level from earlier this morning, we dont traders will dwell on this 2ndtier data for very long if broader risk sentiment deteriorates further.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

MAR CRUDE OIL DAILY

MAR CRUDE OIL DAILY


EURUSD

Euro/dollar has fallen back below the 1.0850s to start the week after traders feel they have to price in some of the panic selling were seeing in Italian assets today. The euros new status as a funding currency has allowed it to benefit from risk-off scenarios of late but we think it's been hard for traders to ignore the 6% plunge in the Italian stock market and 10bp spike in 10yr BTP yields earlier this morning. Germany reported a higher than expected IFO survey for the month of February today and while we laugh at the institutes conclusionthat the economy seems not to be affected by the coronavirus, traders are taking everything at face value, like they usually do, and have bid EURUSD off its lows.

The leveraged funds at CME added to their net short EURUSD for the 4thweek in a row during the week ending February 18 and we think theyll remain in charge so long as the market stays below the 1.0880s. Germany reports its seasonally adjusted Q4 2019 GDP figures tomorrow.

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

APRIL GOLD DAILY

APRIL GOLD DAILY


GBPUSD

Sterling has slipped back below the 1.2940-50s support level to start the week as this weekends surprising surge of conoravirus infections inside Italy sparked broad demand for dollars. The CFTCs latest Commitment of Traders report showed the fund net long GBPUSD position extending for the second straight week during the week ending February 18; a development which we think doesnt help the market here because these new positions (and the ones added a week before) are now underwater.

This weeks UK calendar doesnt feature any notable economic releases but well hear from the Bank of Englands Andy Haldane at 1:30pmET today.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY


AUDUSD

The Australian dollar is holding up well this morning despite the plunge in broader risk sentiment, and we think this is because the USDCNH market is believing Chinas claim that there were just 11 new cases of coronavirus reported outside Hubei province today. This arguably fudged statistic looks laughable when compared to the explosion of new cases now within much smaller populations outside of China, but the headline is positive enough for our take everything at face value markets and we think this largely explains USDCNHs continued struggle at the 7.05 handle. Since the AUD has shown a good correlation with CNH lately, wed argue the inability for the Chinese yuan to weaken significantly today part in parcel explains the Aussies ability to hold up here.

Everyones now talking about next weekends Reuters poll expectation for the upcoming Chinese PMI report for February, which at the moment shows a fall of just 5pts in the Manufacturing index to 45.0, versus a read of 50.0 for January. These expectations should be much lower in our opinion, and so well be watching these expectations this week to see if they get revised downwards. An unrealistically high expectation could set the markets up for grave disappointment when they reopen next Sunday night.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY


USDJPY

Dollar/yen is slipping lower today but not with the intensity that were used to seeing, because the worsening coronavirus outbreak in Japan has arguably put a dent in the yens traditional safe haven status. The US 10yr yield has plunged over 10bp to the 1.36% level this morning but USDJPY is only just now breaking below the 111.00 level. The S&P futures are now trading down 100pts (-3%) and the April crude oil futures are plunging 5% as demand fears rule the day. Even the Fed Funds futures market has joined the panic, with a 25bp cut now being fully priced into the June FOMC meeting. We think USDJPY will be hard pressed to buck a worsening risk-off trend in NY trade today, but we think the market will find buyers on dips to 110.20-50 if the number of conoravirus cases continues to rise in Japan.

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BUND YIELD DAILY

US 10YR BUND YIELD DAILY

Charts: Reuters Eikon

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