The Yen has rallied on broad risk-off positioning as stock and commodity markets tumbled and top grade sovereign bonds rose. As for other currencies, the dollar bloc and other commodity currencies have underperformed, along with BRIC and other developing-world currencies.
The Dollar traded firmer against these underperformers, but lost ground to most of the other major currencies, such as the Euro and Pound. The Fed cut rates by a massive 100 bp in an emergency move announced on Sunday, which brings zero interest rates to the US. This was accompanied by the Fed, BoJ, ECB, BoE and SNB announcing measures to boost global dollar liquidity. The BoJ also eased monetary policy and pledged to ramp up exchange-traded funds and other risky assets, while the RBNZ slashed interest rates in New Zealand by 75 bp, taking the cash rate to 0.25%, and the RBA injected liquidity into Australian money markets.
G7 leaders will be holding a teleconference at 14:00 GMT to discuss the coronavirus.
The extraordinary measures didn’t assuage market fears, especially with data out of China showing vertiginous 13.5% y/y and 20.5% y/y plunges in industrial production and retail sales in the January-February period. Asian and European stock markets plunged, and S&P 500 futures hit the 5% limit-down mark.
USDJPY trading has been choppy. The pair dove to a low at 105.13, subsequently bounced to a 107.35 high before slumping back to the lower 106.0s, all the time remaining comfortably above recent trend lows. Sub-100.00 levels look like a real possibility in USDJPY, assuming, as looks likely, the coronavirus continues to wield havoc.
AUDUSD, in contrast, posted a fresh 11-year low, at 0.6097. With global efforts to contain and delay the spread of the coronavirus likely to persist and intensify, and investors faced with uncertainty about how long these will stay and how severe the economic consequences will be, markets are likely to remain apt to further risk-averse positioning.
The strongest moving pair today remains the CADJPY with a move lower of some 2.75% (the pair was one of Friday’s best performers!) The pair closed on Friday over the psychological 78.00 level at 78.18, only to plummet in the opening hour today to 76.30. A recovery to the 200-hour moving average at 77.45 was rejected with a break of the daily pivot point at 77.17 with the close of the 04:00 GMT candle at 77.03. The move lower has now breached S1 (76.00) and is testing 75.50 a move of some 2.2 of the H1 ATR.
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Stuart Cowell
Head Market Analyst
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