Worries of Coronavirus Plague World Markets

With new Coronavirus cases in Italy, fears are spreading that the virus may move further into Europe.

FOREX 1

As I sit at my desk this morning the first headline, I see is “Head of WHO expert team to China urges the global community to move fast in their control measures to stop the virus from spreading”.  Obviously, this is what many traders of already been thinking as stock market indices around the world have been selling off all day.  The S&P 500 is currently down 2.5% near 3250, while the  FTSE and DAX are currently down 3.4% and 3.75%, respectively. Although the motto has been “buy the dip” in stocks for the last number of years, one has to wonder if this can be the straw that breaks the camel’s back.  

Source:  Tradingveiw, City Index

With new Coronavirus cases in Italy, fears are spreading that the virus may move further into Europe.  Northern Italy has canceled public celebrations and closed schools to try and stop the coronavirus from spreading and neighboring countries are considering closing the borders.   In addition, cases in Iran have spread and Pakistan has closed the border.  One has to consider how many unconfirmed cases there are in that region.

Gold is up another 1.8% as stocks markets have been selling off.  As we discussed in the Chart to Watch in our Week Ahead article on Friday, the target of 1720 from the longer term flag formation is now within sight!  Buyers will be looking for pullbacks towards 1650 to add to longs.  This level is near the gap fill from overnight.

Source:  Tradingveiw, City Index

Interesting, USD/JPY is holding up.  Although the pair is down on the day,  with the equity sell off today one would think nicely near 111.30.  USD/JPY is only down 40 pips from today’s highs.  This may be because the GPIF still  buying and reallocating into foreign bonds.  Or, this may be from fears of the spread of the coronavirus in Japan, therefore taking away the yen as a “flight to safety”.  We may see continued buying on dips towards 110.30/50.  There is horizontal support, as well as trendline support from the long-term symmetrical triangle near these levels. 

Source:  Tradingveiw, City Index

Over the next few days and weeks,  comments from officials at the WHO and CDC regarding the coronavirus will be closely scrutinized.  In addition, watch for any comments from senior government officials in Italy, Japan, South Korea, Iran, and other countries regarding the spread of the virus.  Stocks and gold will be very sensitive to these comments.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.