A new deadly virus outbreak in China has taken a step for the worse. There are now 6 confirmed death and the virus is more contagious than thought before. Medical personnel are getting ill which means that the virus is spreading from person to person. The illness could not have come at a worse time, as the Asian region gets ready to celebrate the Lunar New Year holidays during which hundreds of millions of Chinese will travel across the country and globally. Asian stocks and indices declined with the Hang Send Index dropping 2.82% from yesterdays close.
It seems like the Eurozone economy may indeed be stabilizing. German ZEW Current Conditions for January are heading closer to the positive mark and were released at -9.5, ahead of the -13.5 forecast and -19.9 previous fact. German ZEW Economic Sentiment in January rose to 26.7, well ahead of the 15.0 forecast and 10.7 previous fact. The Eurozone overall ZEW Economic Sentiment also increased to 25.6, ahead of the 5.5 forecast and 11.2 previous fact. Let’s see if a hawkish statement from the ECB will follow on Thursday which would bring more recovery for the Euro.
EUR/USD on a Daily TF is attempting to rise above the head and shoulders neckline that was breached down yesterday. The Euro recovered up to the 50% Fibo level which coincides with the 48 EMA, currently trading around 1.11052. 13 EMA is pointing down, Parabolic SAR and MACD are both still bearish.
Resistance: R1 13 EMA 1.11227, R2 38.2% Fibo 1.11407, R3 23.6% Fibo 1.11784.
Support: S1 61.8% Fibo 1.10798, S2 1.10575, S3 1.10266.
The United Kingdom showed employment stability with the release of better than expected earnings in November which were left unchanged at 3.2%. The Claimant Count Change previous fact was revised down from 28.8K to 14.9K, which is the same as the fact released today for December, below 22.6K forecast and employment MoM in November increased by 208K ahead of 110K forecast. The Bank of England will now have to weigh the odds ahead of the monetary policy meeting next week.
GBP/USD on a Daily TF reached our first resistance at 1.30500 which coincides with 13EMA as resistance. Sentiment for the sterling remains to the downside. Tomorrow pay attention to U.K. Retail Sales for December at 9:30am GMT and CBI Industrial Trends Orders for January at 11am GMT.
Resistance: R1 50% Fibo 1.31675, R2 1.33327, R3 1.34529
Support: S1 1.29500, S2 38.2% Fibo 1.28821, S3 1.28020.
The Japanese currency also showed recovery today. The Bank of Japan left the interest rate unchanged at the -0.10% and the accompanying statement was optimistic. The BoJ sees inflation is likely to increase gradually toward 2% while they continue to carefully monitor developments.
USD/JPY on a Daily TF dropped to our first support target at 109.900 and is currently trading around 109.998. The United States Dollar remains strong. Last week President Donald Trump was able to secure two trade deals, the phase one of US-Sino trade agreement and the Senate also approved the USMCA trade agreement that replaces NAFTA.
Today, world leaders gathered in Davos, Switzerland for the 50th Annual World Economic Forum. President Donald Trump expressed his jubilance for the United Sates economy and noted improvements that have been made under his presidency. He mentioned that the phase two negotiations with China will start soon, but tariffs will remain in place during negotiations. He also mentioned a trade agreement between the United States and United Kingdom, to be pursued after Brexit.
13 EMA is in the vicinity of our local trend line up. Further correction to this level is not ruled out, but the pairs sentiment is to the upside. MACD is bullish, Parabolic SAR is pointing up, both 13 and 48 EMA are pointing up as well.
Resistance: R1 110.681, R2 111.069, R3 111.376.
Support: S1 13EMA 109.713, S2 109.624, S3 109.362.