This Thursday marks another day for risk-on sentiment. The financial markets are optimistic following a statement from Chinese media that a possible effective drug has been found to treat people infected by the coronavirus. The World Health Organization, on the other hand, did not confirm this. United Kingdom scientists have also mentioned that a vaccine is in the making and will be available in a matter of months instead of years. Meanwhile, the virus continues to spread at a rate of 3,100 new cases within 24 hours and the death toll has climbed to 563 with 97% being from Hubei province, a region of approximately 60 million people that remain on lockdown.
The Hang Seng Index rose by +2.42%, the Shanghai Composite +1.72% and the Nikkei 225 rose by +2.38%. The Dow Jones Industrial Index rose by 1.68%. In crude oil, WTI is up by +1.93% and Brent Oil by +1.25%.
The markets’ optimism only strengthened when China announced it would cut tariffs on some imported goods from the United States worth about $75 billion.
The United States released upbeat macroeconomic news yesterday, starting with ADP Nonfarm Employment Change for January released at 291K, above the 156K forecast and 199K previous report (revised down from 202K). Market Composite PMI and Services PMI were also released above forecast at 53.3 and 53.4 respectively, followed by ISM Non-Manufacturing PMI, which was also above forecast at 55.5.
President Donald Trump is now the 3rd president of the United States to be acquitted from impeachment, following Andrew Johnson and Bill Clinton.
The European Central Bank President, Christine Lagarde, mentioned that the coronavirus has brought new uncertainties along with climate change issues that may have an effect on monetary policy.
EUR/USD on a Daily TF dropped down to 1.09987 and closed below 1.10 at yesterday’s market close and is currently trading around 1.10055.
Technically: The Parabolic SAR is pointing down, and the MACD bearish histogram is increasing. All three EMAs 13, 48 and 200 are pointing down. The 13 EMA is following the local trend line down, the 48 EMA is at 61.8% Fibo and the 200 EMA is at 38.2% Fibo working as resistance.
Resistance: R1 1.10300, R2 1.10500, R3 61.8% Fibo 1.10798.
Support: S1 1.09812, S2 1.09670, S3 1.09400.
There haven’t been any substantial releases from the United Kingdom. Yesterday morning, the UK Composite and Services PMI were released slightly above forecast at 53.3 and 53.9 respectively. There are no releases today, so we pay attention to the United States Initial Jobless Claims due for release at 1:30pm GMT and on Fridays US Nonfarm Payrolls at the same time.
GBP/USD on a Daily TF continues to trade in its respective range, currently slightly below 1.30 resistance at 1.29717.
Resistance: R1 50% Fibo 1.31675, R2 1.32500, R3 1.33327.
Support: S1 1.29500, S2 38.2% Fibo 1.28821, S3 200EMA 1.28361.
USD/JPY on a Daily TF is trading slightly higher around 109.820. The pair is being driven by the strong USD and risk appetite. Again, we look forward to United States macro data releases for further movement.
Resistance: R1 110.214, R2 110.681, R3 111.
Support: S1 109.515, S2 109.270, S3 23.6% Fibo 108.911.