The demand for safe haven assets has understandably been amplified amid swirling concerns over the coronavirus outbreak. Gold has certainly lived up to its billing as a place of refuge, surging to levels not seen since Q1 2013 and is now testing the $1660 resistance level. Using the price action from 2012-2013 as reference, another leg up may bring the $1690 region into focus.
Bullion bulls have only gotten more tenacious since last week, as the coronavirus’ spread outside of China prompts market jitters about the duration and global footprint of this outbreak. Ultimately, market participants would want to know how much the coronavirus would impact global economic growth.
As things stand, Gold is on course for five consecutive days of gains, having climbed over nine percent so far this year. Until the spread of the coronavirus is contained, investors are likely to continue seeking shelter in Gold until the Covid-19 storm clouds disperse.
Coronavirus-related concerns to keep EURCHF’s downward trend intact
Covid-19 has given the Swiss Franc yet another reason to strengthen against the Euro, with EURCHF now testing the 1.06 psychological mark. Serving as a barometer of risk sentiment on the continent, the currency pair has weakened by some 2.3 percent so far in 2020. The Franc also boasts of a year-to-date advance against all G10 currencies except for the US Dollar.
With the China-dependent EU economy struggling to overcome these global uncertainties, it is unlikely that the Euro can stage a meaningful rebound against the safe haven CHF over the near-term.
Covid-19 erodes Yen’s safe haven status
Covid-19’s spread in Japan has upended the Yen’s status as a safe haven asset, with JPY having weakened against all Asian currencies so far in February, except for the Malaysian Ringgit. Although USDJPY has moderated since breaching the psychological 1.12 level, the Yen is still trading around its weakest levels against the US Dollar since May 2019.
With the number of confirmed cases in Japan now exceeding 130, the coronavirus is compounding Japan’s economic outlook. Investors will closely scrutinize Japan’s latest data on inflation, industrial production, jobs, and retail sales, all due this Friday (Feb 28), and set them against the latest domestic developments around Covid-19, in determining the Yen’s next moves.