Coronavirus Cases Jump So What Next For Markets

Okay, very good morning. It's Thursday, 13th of February, so I hope you're doing well. I'm going to go over an update on the virus because it did see a move overnight in the Asia-Pacific markets, so I'll get you up to speed of why that occurred, what the latest status is in China. Also going to have a quick look at the euro and EUR/CHF. Quite an interesting chart that I saw someone putting around on Twitter, uh, on my way into work this morning. I thought I'd tie that into some euro discussion for the briefing, and then also an update on the UK cabinet announcements that are going to be coming out a bit later on today. Is that going to be meaningful or not for price? Starting off though, let's have a look at the, the charts. And probably the most clearly evident thing that you can see here is these two center charts, the NASDAQ 100 and the S&P, as I've got it here. And you can see with the DAX this morning, it's just drifted lower in the European open. And when it comes to the S&P, you can see quite a sharp downtick that was seen just before midnight if you were looking at London time. So you can see this drop here. And why did that occur? Well, actually, if you look at the other asset classes to see the general risk, you can almost connect the dots So equities blipped down, the US 10-year blipped up and grinded higher, and then gold was bid and then started to move higher during the Asia-Pacific session. So very much almost a reversal of what we had yesterday. You remember in the briefing this time yesterday, we were talking about the fewest number of reported cases of the coronavirus in Hubei, the province of China, which is kind of the epicenter of the virus outbreak. It was the fewest reported cases in a month. However, this is the complete opposite movement. And why has that happened? Well, what's come out overnight is the Hubei National Health Commission have said it would now start including cases confirmed by clinical diagnosis, which refers to using CT imaging scans to diagnose patients alongside what was originally those confirmed by the existing method of nucleic acid testing kits. So this has then seen a 15,000 uplift in the number of people in reported cases. And so if we quickly flip over to this graphic now, uh, we've added another 200 or so to the death count, and the total confirmed now is north of 60,000. So overnight you've had a bit of a risk-off move. However, this morning it's been a fairly tame European open thus far. My initial interpretation here is that, don't forget, we were trading up at record high levels when it comes to the likes of some of the US indices. And if you actually put it into context, the move that we've had, when you start looking on a broader time frame of the likes of the S&P, I don't think it's quite time to, to panic just yet. In fact, I think far from it. And even if we did get a bit of a pullback, we start moving further down, you know, there are plenty of strong good levels, I think, on any pullback in this S&P 500. And even if we did drop, I think, 10, 20 points, again, I don't think that that's crisis mode on this virus. And I think largely a lot of the market somewhat prepared, which might explain why this move has been relatively moderate at this point because a lot of people obviously were already questioning the validity of the numbers that China were putting out. And I think a move up of 15,000 doesn't really break the mold of surprise too much. It's not like it's been lifted by 200,000, for example, or 150,000. So at the moment, I think that yes, a little bit of a knock to prices. You can see oil also just a touch lower, but still up quite firmly from the, the gains that were seen yesterday. And so yeah, I'm not, I'm not so sure that you're going to get a continuation of this throughout the session, but time will tell. I think the better way is without— not forcing your opinion— let's wait till the US come in, because they wouldn't have seen this news yet, and they won't till about 11:00, 11:30 our time when they start to come into, into the market. And how they perceive this situation will be quite key. But I, I still kind of— I'm looking at this, that if we did see a concerted pullback, I think for the equity players, just more reason to get long again at this point. The other chart that I just wanted to have a look at was EURUSD. These are the headlines you're seeing this morning: Euro slumping to its lowest since 2017 with economic woes in focus. And this is a graphic of the EURUSD pair. And as you can see, having broken through that period of the kind of late summer lows that we had in EURUSD, taking us all the way back down to here on the left-hand side from 2017. Now, a lot of different things going on here. A lot of the focus, of course, though, has been on Germany as well as overall general weakness in European economic data. Risks around a no-deal disorderly Brexit still exist, of course. Political stress— it's kind of like spin the wheel and pick your country in Europe, from Italy to Spain, now to what's happening in Ireland as well. There's lots of changes happening and uncertainties and political stalemates. Uh, and then one of the key things, as I just said, is the German economy, and that's been the one, um, that's of particular interest just given its economic contribution to the euro area. And this is going to come into even sharper focus tomorrow because tomorrow you get the German GDP figure. Now, this is a look at the, the report I issued, uh, the, the Macro Menu piece that I deliver on a Monday. And this is looking at German GDP quarter on quarter. So Bloomberg Economics forecast is for a contraction in that figure. And as you can see here, it'd be the second contraction in 3 quarters for Germany. And so, you know, that kind of engine room in Europe, so to speak, somewhat stalling. And that, you know, manufacturing contraction that we've been seeing for a period of time, companies still relatively unsure about the prospects of the economic future, ongoing with some internal domestic political stresses of their own. And then throw in the threat of US tariffs as well, particularly on the automotive sector. It's almost like the perfect cocktail to weigh on Europe. And yeah, expectations gradually shifting. Is Lagarde going to have to do more in some fashion in, in time? And I think tomorrow's data is going to be quite key as well for that near-term direction of the, of the euro. Euro-Swiss, this is one I did want to bring up. And this is looking at EURCHF over the last— well, you're looking at the last several years here, so 8 or 9 years. And this is a— this level at 1.20 is one that I know Will will remember very fondly. I remember that day because actually at the time it was me and my brother who were sat on the analyst desk, and I remember we were just sat back it was, I remember it was kind of possibly late morning, something like that. There was nothing major coming out, so we'd be sitting back just chatting, but we're kind of half an eye watching all the newswires. And then a headline dropped, and the SNB, the Swiss National Bank, dropped their currency floor. And at that point, I remember, because there was a period, you can see here, so if we look back to late 2014, you can see there was a period of months where we just sat at 1.20, and a very common play at the time was anytime EURCHF came down to 1.20, all these prop traders would just buy it because it would be defended by the Swiss National Bank. They would actively look to weaken their own currency and be an export nation. You know, if you think of Nestlé, Swatch, these are the biggest companies in the Swiss S&P index. And so what was happening was you'd hit 120, they would weaken their currency, and you'd basically get a free 50 pips, 25 pips every time. So every time it hit the floor, you just, you just go long. And it was happening every time. So you can imagine, after this was happening for months and months and months and people were getting these free trades, almost everyone would load up as soon as we hit 120. However, as you can tell then, that the magnitude of longs at 120 was pretty massive, and rightly so, because if the central bank are going to defend it, you've got— there's no downside. However, then this headline drops, and I remember us seeing it, we kind of jumped out of our skins, and it just said the SNB dropped their currency floor of 120, and that was the move that happened. And it happened like bang, like that. And good for us, actually, you know, we saw it, we said it, we got it out there so fast that, you know, fortunately for people like Will— and this was pre-Amplify, or this was pre-me working Amplify— that was his biggest ever trading day by a country mile because he was able to just be alerted to the news. And that's the beauty of the squawk, I guess, these unexpected black events. Now, one of the things that was bad for me though is that some of you might remember the broker Alpari. Alpari used to pay, uh, the company I used to work for a lot of money for our services, and they went bust on that one single move. And they were at the time one of the biggest brokers in Europe, and because they weren't appropriately hedged for that move, completely wiped them out. In, in a matter of seconds. So it was pretty, um, pretty amazing. And actually, if Mr. Alpari is watching, you still owe me a lot of money. So, because you didn't pay your fees because you went bankrupt. But, uh, but yeah, anyway, you know, this move was, was quite interesting. And if you actually look at Euro Swiss from a technical perspective, look where we got to in 2018. You know, this is kind of Technical Analysis 101 here, when you're looking at this chart, we come right up to 120 absolutely perfectly on that previous protection level that we had back in 2012, protected again in 2014. The break came up to that level, but interestingly, look where we are right now. Now, the Swiss National Bank don't have a, um, an actual verbalized floor in play in this day and age. However, just look where we are right now in EURCHF, and byproduct then of euro weakness, the Swissie is strengthening, and that's not good for the Swiss companies because, as I said, they're exporters, and we're now down heavily from where we were when they were protecting before. So what's quite interesting, I think, from a longer-term perspective here on this EURCHF chart is we're right on the tipping point. And any further breakdown here, then yeah, it's going to be super interesting to see if we break through those 2016 and the 2017 levels, you know, where do we go to then? You know, does that open up a door to 1.04, 1.02, this kind of price activity we had back down in 2015? And if, if that EURUSD pair has now broken through that meaningful part in 2019, and that imparts more euro weakness and we start to get a bit of a technical break and a run here, you know, the EURCHF chart also looks quite, quite appetizing as well at this point. Okay, final thing on my side. This requires no more than probably 30 seconds to explain because it's not going to be a market-moving thing, but just so you are aware, when the headlines start dropping, Boris Johnson, the UK Prime Minister, is to reshuffle the post-Brexit UK cabinet. Today. So ministers expected to leave include Culture Secretary Nikki Morgan, stayed on as a temporary measure to oversee the review of the Huawei 5G network issue that the government's been going through in the last few weeks. Probably one of the most recognized ones, you'll remember that kind of bellowing chap, the Attorney General Geoffrey Cox. He may be replaced and moved to another role. People The whole reason why this isn't going to be market moving is the Chancellor, Sajid Javid, the Foreign Secretary, Dominic Raab, the Cabinet Office Minister, Michael Gove, the Transport Secretary, Grant Shapps, they're all staying. So nothing changes in terms of the, the more senior positions. A lot of this is being tabled in the press as a move about equality, more women in, in more senior positions and so on. So looking at the pound though this morning, um, it has seen a little bit of a blip up Now I haven't seen anything specific why that has happened. A few people have been banding about the UK RICS house price balance data. It did come out, that come— that data comes out very early in the morning, um, and it showed a +17 reading, in fact the highest since May of 2017. So again, like some of the other UK economic data points, we've had a bit of a post-election bounce on a bit of clarity, at least short-term over the ability to pass then this Brexit initial part into the implementation phase has just led to then the highest since Jan 2016 of vendor instructions that we've had. So I don't think, you know, I can't say that I've ever seen UK housing data, you know, apart from perhaps the depths of the financial crisis, really move markets. So I think that's a little bit of trying to curve fit a bit of a reason. I don't think there is one other than, you know, sometimes you just got to go with the flow and it's moving higher. It's come to a natural point of perhaps a bit of resistance on that R1 and that previous high seen yesterday afternoon. I don't— I wouldn't read too much and over-interpret that, uh, to be honest with you. EURUSD though has been clawing a little higher as the dollar has just seen a bit of weakness as Europe has come into the market. All right, in terms of the The session, what have we got on the agenda? Um, very much more US-focused. Do keep a half an eye out for the IEA monthly oil report, but, but I guess in a way the cat's out the bag somewhat because the OPEC report came out and obviously they've slashed their demand on just given the circumstance that is happening globally at the moment, and particularly China on the back of the virus. And that seemingly didn't really move markets, and the reason there, because pretty much as expected really. It's not, it's not that surprising. So I'd expect pretty similar, worth keeping an ear out for, but maybe not that market moving. More so, I'd say, from a bigger top-level macro theme— how do the US perceive this coronavirus update to their methodology of numbers? And yes, it sounds pretty punchy on the numbers, but I actually think the market will brush this off is my, my kind of baseline view. Into the afternoon, US CPI, of course, always important. Weekly jobless claims as well. From a speaker's perspective, got a couple. The chief economist of the ECB is speaking, uh, Lane, at midday. ECB's Panetta at 5. Remember, now part of the, uh, the executive committee on the ECB. And then a few others in the evening if you were to stick around late. Anyone in the US, Fed Fed's Williams speaking at New York Bankers Association. That'll be at 4:30 Chicago time. Any fixed income traders, you got about €4 to €5 billion worth of range of Italian supply coming to market, with €19 billion in a 30-year bond auction from the US Treasury. All right, that is it. So wish you all a good day. And for the guys in Stage 2, I'll be giving you a lecture on economic data a bit later on this morning. Otherwise, I'll see you in the chat room. Thanks very much.

Hey, hi guys, hope we're all well. Start off with the pound as it's just coming up to a relatively interesting level, not far from that 1.30, which we were talking about yesterday just being a key line in the sand because You can see if we go back to and try to get this year in the picture, the amount of times we have previously found support around this zone. We break through it, come back, we test it yesterday, sellers take over, and look, we're back there again. So it's key, uh, key point to, to take into account. If we get above there, fine, let's get a little push and start targeting some of the other breakdown areas around 130.20, uh, as well in the futures. But for the moment, first real test out this this morning, just coming off a touch. But certainly the bulls will be liking the look of that if we can push through there. To the downside, when we do start thinking, you know what, this pound's gonna start pushing lower again, or maybe if we can break through this trend line, which would be how I'd feel pretty confident, especially if it marks up along with the 1.2956, which was the low. You might be able see it on my camera, uh, low of the 4th, high of the 10th, then the high of the morning of the 11th, and the afternoon lows and yesterday's low as well. So key, key zone there for the, for cable. And it's all— but it reminds me of, um, of EUR/USD last year when everyone would get excited every single little push we'd have in euro and it'd break a trend line and come all the way back low and make a new low for what would be the year. So for the pound, if we get above, you know, that 130 area, let's push on, fine, can deal with that, uh, continuing to push on a bit. If we do come down and test this trend line, a break of that, I feel we could get a bit of an unwind. And obviously you've got some half-decent profit targets near the lows of the year there. The euro, well, might as well start on the weekly chart just to say what every single person on Twitter has said. We are the lowest we've been for quite some time now. Let's just draw a horizontal line on that low. You can see here almost looking to start filling the gap from Macron, the first round French elections. So we're talking April 2017 on the futures there. We had last, or we had traded there. We actually did of course trade that in May as well. A break of these lows, you gotta start thinking about um, you know, maybe a bit more momentum coming into the gap fill. And of course, just get that on your charts because if it does push lower, you know, you've got to have the, the longer time frame on to see where that level of support in theory could come in. And you don't want to be caught out selling just before it, uh, or not taking profit on it. Let's have a quick look. This is how we traded today, just having a little, uh, push to the upside. Got a bit of dollar weakness come in. If we have a look at the, the way this is traded, you know, there'll certainly be people eyeing up the pivot as a level of resistance. I think you're going to want to see a bit of price action confirming that before wanting to get in short, just considering how clearly this trend has come. And we've obviously hit a very important technical point, um, and you can see 1.810802 is, is roughly where that gap would be. By the way. So if we do get a push on below these lows, the continuation strategy, you know, isn't the worst idea in the world. Looking for something like this, break through, take it, and then you can go in as well. But the pivot key to the upside— other than that, you've also got, I believe, 109.24, pretty well respected level on both yesterday and— what day would that be— Tuesday, um, as well. So The pivot, first sort of real resistance point that the bulls will want to take it over, and then up towards 109.24. Can we really start pushing on and on and on? Perhaps. But I think, you know, the— there's been a couple of times where people may have thought that's the case, only to be dealt with a bit of reality as this market comes lower again. But keep an eye as well, if we do push on, any potential trend lines that's just been guiding price over the last few sessions. Um, but yeah, I think pivot just before the R1, uh, or the continuation strategy for shorts at the moment don't look too bad. Aussie dollar, uh, has had a decent, you know, little few days coming down overnight due to the, the China, uh, headlines. I agree with that. It's— I mean, it'd be quite funny, I think, if stocks were to, to find a medium-term top last night. On these, these numbers which have kind of been proved to be, you know, not all they seem. It'd almost be the fake news, uh, has, has won against this market. But that said, bringing it on to the Aussie, is this now an opportunity to get long again? Uh, so there's a couple ways to have looked at it, you know. Either you identified the, uh, that low from 0.6711, which was a previous high, really good level to be honest, just on a multiple days. You can see why we found support there. So your line in the sand, happy to stay long if it stays above that. For example, if you're more medium term, probably worth getting on a bit of a trend as well just below that. Uh, or if we have a look more intraday, the pivot today looks to be pretty key, most notably because you've got a couple of highs in there. You've got the low from yesterday, we broke down there in early hours. It's almost like we get above there, let's have a go at trying to get that double top from yesterday. So pivot is key. If that holds up, if the pivots hold up in equities, fine, we can drift back lower. But I think for now, if especially if we can have a bit of a bounce in the dollar to the upside of these pairs, then above that pivot isn't a bad trade to look for at all. Let's have a quick look over to equities, which did come down in, in that early trade really from, uh, well, just just after 11, wasn't it? 11:45, 11:30, we pushed lower. I was playing football last night and as usual can't sleep after I play. So finish at 10, get home, eat, and then just sit in bed wired trying to get back to sleep, or get to sleep. And Twitter was, you know, it was talking about it, but by no means was it, you know, really trying to get this to go lower and lower and lower. So I'm with Ant in I don't necessarily think it's, uh, gonna be, you know, a big selling opportunity. That said, you've got to prepare for both. And if we have a quick look at some of these, these levels, it's gonna make us a bit bigger. You can see why we found support on the S1 area. It's also a good level from, uh, yesterday, kind of similar time to where we're trading now. If you get a breakthrough of that, then you can start thinking about, you know, market wants to come down to 33.53, 51. The lows that we had back on Tuesday. Uh, also we, you know, found some resistance on this level previously, and you've got to go with the flow. If you think, you know what, I like the idea of looking to get long, you can see we're starting to kind of respect a bit of a trend here on the 15-minute. Hasn't quite made that one yet. You've also got a couple of lows in the mix, hence why we're just finding a bit of resistance. But a little break of, of this As long as the volume seems to be there, could be a little option. Another key zone for it to get to is basically the pivot. You can see we had some resistance there last night. We broke, uh, obviously through it and came back down to back up to test it. So if you're bullish, you know, that's a, that's an area I would say you want to, want to consider. It's a similar picture across the board for US equities. You know, it's a case of trade what you see, not what you think. I, you know, I do think we, we go higher, but if we, if we push below these lows, or in the S&P, then fine, we can continue lower. If we push below that low in the Dow Jones, it's, you know, you can see just how significant it is. It's the high that we had back on Tuesday, Wednesday morning. We broke through there just before the cash open. We found support late last night, and then now as well. It's a key level. Below there, you'd have a couple of stops from longs and people looking to get a bit more excited about push down. And you can see, just to reiterate the S&P trend. You can see that developing here on the Dow as well. Just obviously make sure you get that as, as good as possible. Quick look at gold, which you would have expected overnight would have pushed higher, and it did. Just starting to find a bit of resistance around the, the R1. I'm just going to put this on a 60-minute because you can see just the significance of this area in general. Um, let's just go back here. We'll be looking the 10th overnight on the 9th. 1580, quite an important zone that you would want to consider. To the downside, if we were to push lower, when would you get excited about, you know, this maybe correcting itself? I would say this, this point here, 1575s, the higher the overnight initial push and then support come as that came through, that would be something you'd look at. And as well, you know, with these kind of moves, if you do like with the S&P start developing some kind of trend the way gold can move on breaks of these trends can lead to faster moves higher or lower. So to keep a watch on that, and of course mark up any levels to the downside as well for potential supports above. If we do get that push and equities, you know, do want to come under pressure, or there's following, following up with these numbers that maybe make it do, make it do, make it seem worse than it perhaps is, obviously just be aware of all of this resistance around here from those, uh, what we're talking here, the third, the beginning of the month, the second, uh, as well. But for now, I think this resistance level should hold for the morning. It'll be interesting to see what happens at 1575. Oil, to wrap it before a quick look over at the, the DAX. Had a nice day yesterday, it had a nice day, nice little push. Those lows just starting to seem a bit distant. However, obviously overnight, uh, back to reality for, for oil. So those that are long, it's not going to be straightforward move up, of course. And we've just started to, to find a bit of a floor perhaps here. You've got, uh, you know, what was the previous high. We almost came back to test it late yesterday. It's a zone, you know, whether you want to call it down to 82 to kind of where we're trading now. I think if that goes, then, you know, the situation elsewhere is going to be worse and we can find drift lower. But if you're bullish oil, you know, these dips like you've seen in Aussie, like you've seen in equities, there's opportunities perhaps to get long, uh, along obviously if it suits your, your trade that you're looking at. I was, you know, just possibly thinking about, you know, getting in more medium term, adding to a position on oil if we get above this 52 area. And we didn't quite do it yet. I know it's a headline, the reason for it, but you can see here. If I just draw— and again, I like a zone here. You've got the low that we had back on the 27th, got choppy, but we found support on the 30th before breaking through a day later. Resistance on the 3rd, the 5th, overnight 6th, and then yesterday as well. It's just starting to form a range. Are we drifting back lower to test the low of the year, or do we get a nice little break forward? And actually, uh, we're now looking towards the next key point around 55s. Maybe time will tell, of course, on that one. Let's have a look at the DAX. A couple of, uh, you know, big pushes lower in early trade before the open, but after 8 o'clock, last 30 minutes, it's, you know, relatively choppy, you have to say. Your line in the sand to the upside, just like the S&P, may well be— is the pivot. Good support yesterday, good support overnight. We broke through. Have we found resistance yet? Not quite. So that will be, uh, the key level for me. However, do you know, just be aware if the euro was to, you know, you know, strengthen massively, that might just hold this back a bit. To the downside, really the, the low— so a lot of equities finding support technically on really what was the next level. And for me, that's a, you know, a sign that if it was to be a bigger move, we would clean them out quite, quite quickly. So yes, it's a wait and see. You've got your lines in the sand. If you're not in a trade now For example, for me, the DAX is— if we can get above the pivot to go long, below these levels, and you'd want a nice close, then fine, we could, we could drift lower. But other than that, I think it's a wait and see. Uh, the euro just trying to push up, so keep an eye on that pivot. But like I said, I wouldn't necessarily have orders waiting to go short just yet. I want a bit more confirmation on that. Hope you all have a good trading day. We'll catch you in the chat with any questions. Of course, please, uh, do let us know.