The virus adds pressure on commodities and Asian markets

Fears of coronavirus proliferation have hit Asian markets with renewed vigour. Japan’s Nikkei225 lost 2% in the morning, while other Asian markets also faced a severe decline, updating their multi-week lows. Futures for US indices declined on Thursday the beginning of the day, returning to their yearly lows on the Dow Jones and S&P 500.

The market rebound caused by robust reports from US companies was uneven. More and more companies from Europe and the US are getting drawn into this story as they are forced to close their shops, cafes and offices temporarily.

SARS outbreak in 2002-2003 showed, the epidemic is suppressing the mobility of citizens, resulting in a decline in retail sales in addition to the direct impact of forced downtime of businesses and a drop in tourist flow.

The growing fear of the epidemic is increasingly affecting the currency market. Flew for liquid instruments such as the US and Japanese government bonds is dragging the demand for these countries’ currencies. For example, EURJPY declined under 120, lows since late November. The technical analysis also moved to the bearish side, as the pair settled under the 200 SMA. Recent decline confirmed the downward trend, initially formed at the beginning of the trade disputes in 2018.

The Australian dollar is even more involved in coronavirus history. The beginning of 2020 was extremely hard for AUDUSD, which is declining almost daily, losing more than 4% during this time. The pair returned to the lows area of August last year near 0.6700, where it had previously been at the peak of fears about the consequences of trade wars.

Meantime, Gold and Bitcoin enjoyed higher demand. Although sentiment, in this case, is far from panicky and the dynamics of rates looks relatively measured, both of this instruments is associated with purchases from the Chinese, searching for insurance for their savings due to fears of weakening yuan.

Brent oil on fears of declining consumption in China has returned to decrease and is testing the area of lows since August below $58 per barrel. During the last six months, the oil has been able to find support in this area, but the risk of a slowdown in Chinese growth “materially below 6% y/y” makes us look for analogies to a stronger sale in late 2018. The strength of the sell-off is evidenced by the RSI index, which on daily charts declined to 22 early in the week, the last this was the case in November 2018. Shortly after that, the index stabilized and turned upward, but the price bottomed out more than a month later, losing 27% before that.

The FxPro Analyst Team