Australian Dollar, US Dollar, Japanese Yen, S&P 500, Coronavirus – Asia Pacific Market Open
Australian Dollar Falls, US Dollar and Japanese Yen Rise as Coronavirus Fears Prolong
The pro-risk Australian Dollar and similarly-behaving New Zealand Dollar were the worst-performing majors on Monday as fears around the coronavirus extended – as expected. On the flip side, the anti-risk Japanese Yen and haven-linked US Dollar received a boost as stocks declined across the globe. The AUD/USD and AUD/JPY saw their worst days since early January and mid-August respectively.
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Notable economic event risk was lacking, placing the focus for currencies and commodities on overall market mood. This is as Chinese bourses are still offline for the Lunar New Year until February 3, producing lower-than-usual levels of liquidity. In practice this means an elevated risk of volatility on breaking headlines that significantly impact emotions in trading.
The Nikkei 225, Euro Stoxx 50 and S&P 500 closed 2.03%, 2.68% and 1.57% to the downside on Monday respectively. The MSCI Emerging Market Index dropped about 3.45% in its worst day since early August. Consequently, the US Dollar advanced against its ASEAN counterparts such as the Singapore Dollar and Philippine Peso, as anticipated in this week’s forecast. USD/SGD may confirm an upside breakout ahead.
The premium for investors to preserve liquidity pushed up U.S. Treasury prices, depressing yields. Anti-fiat gold prices understandably rallied as a stronger Greenback likely depressed some of the yellow metal’s full potential. Sentiment-linked crude oil prices plunged to their weakest since early October. The Euro managed to perform relatively well as Italian political risks subsided after a key regional election.
Tuesday’s Asia Pacific Trading Session – Australian Dollar, US Dollar, Japanese Yen
The focus for currencies will likely remain on general risk trends during Tuesday’s Asia Pacific trading session ahead of key event risk this week such as the Fed rate decision. Reports crossed the wires that the first case of coronavirus was reported in Germany. If this continue to fuel risk aversion, the Yen and US Dollar may continue their advance as the Australian Dollar weakens. That would push AUD/USD and AUD/JPY lower.
AUD/USD Technical Breakout
AUD/USD confirmed a breakout under a rising support line from October, placing the focus for the pair on downside progress. The pair has been on a decline since forming an Evening Star candlestick pattern at the beginning of January This is a bearish signal that has since seen notable follow-through. Prices stopped on support at 0.6755. If this is taken out, that exposes the 0.6672 – 0.6701 range.
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AUD/JPY Technical Breakout
AUD/JPY has cleared a rising support range going back to August – red-dashed lines on the chart below. Prices stopped at the key support range between 73.35 – 73.58. If this area is taken out, it exposes levels not seen since October at 71.73 and would mark a reversal of the medium-term uptrend. Resuming gains entail taking out the psychological area between 74.48 -74.84.
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— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter