• The risk-off mood continues as the Coronavirus outbreak continued to weigh the investor confidence.
  • After the extended holiday, China’s financial market opened with a big gap down, which expected.

ECB and Fed meetings are over, but Novel corona is something we need to focus on.

The market sentiment took a hit by a fast-spreading coronavirus, as it might lead to a slowdown in the global economic engine led by China’s economic downturn. Traders are also cautious ahead of the NFP data, which is scheduled later this week. Last week the World Health Organization declared the Coronavirus an international emergency.

We request traders to focus on the facts, not on opinions. Facts are backed by evidence, whereas opinions are what a person thinks about something.

Danske Bank cited, “Early signs of a slowdown in the spread of coronavirus.”

In a note, the bank said, “The latest number of infections shows that the growth rate of new infections is slowing down. This is good news as it indicates the measures taken are starting to work, and the disease spread will soon decline.”

And the report also said, “Uncertainty is still high, and we would need to see confirmation of this development, the slower rate of increase will hopefully be verified over the coming weeks. If so, it should bring some relief to financial markets.” 

Currency check: Euro finally paused the four straight week losses and closed with 0.50% gains. The price of the major was the volatile first half of the week, whereas it gained momentum at the end of the week.

Now EURUSD held the major support of 1.1000-1.0980 zone if it fails, it could drift further towards 1.0920 levels. While on the upside, the hurdle is seen between 1.1080- 1.1100 levels. Overall, the outbreak of the novel coronavirus headlines will continue to attract financial markets attention.

 Data review: Optimism is returning 

  • The latest survey suggested German consumer optimism is returning.Consumer sentiment in Germany shows signs of recovery with slightly increased optimism at the start of the year, Gfk reported.

GfK has forecast a figure of 9.9 points for February 2020, 0.2 points higher than in January of this year (revised 9.7 points) if you look at the below chart, you see that consumer confidence is            started increasing.

Commenting on the data, Rolf Burkl, Gfk consumer expert, said, “Initial agreements in the trade dispute between the United States and China will also ease the situation in Germany. As an               export nation, the country relies on the free and unrestricted exchange of goods”.

  • The other data, EA inflation up to 1.4%.  Euro area annual inflation is expected to be 1.4% in January 2020, up from 1.3% in December according to a flash estimate from
  • The preliminary flash estimate for the fourth quarter of 2019 GDP up by 0.1% vs. 0.3% in the previous quarter.
  • EZ Manufacturing sector contracts, but at the slowest rate since April 2019. Final Eurozone Manufacturing PMI at 47.9 in January (Flash: 47.8, December Final: 46.3).

 Data preview: Overall, the outbreak of the novel Coronavirus will continue to attract financial markets’ attention. Besides, the first week of February is an empty calendar to the EA, whereas the focus should remain on the NFP data.

 TECHNICAL OVERVIEW

The euro powered higher last week, a month-end factor we believe. The landscape is evolving; one thing that remains unchanged is that the price action continues to remain in ranges.

The support zone of 1.1000-1.09990 is remained intact, and the RSI has been recovering. On top of these, the RVI has turned bullish. All these factors suggest a temporary rally into the euro, which could last long for the next few sessions.

Last week we highlighted, “if you are a bullish EUR, then this is the zone you keep the focus on.” The series of lows in November 2019 (1.0990-1.0980) now became support. On the upside, the hurdle is seen between 1.1080- 1.1100 levels.

Flips side, If the euro fails to hold the next major support of 1.1000-1.0980 zone, it could drift further towards 1.0920 levels.

 

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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