Market News & Analysis
February flight for the USD
Tony Sycamore February 10, 2020 10:27 AM
A rocky start for markets this morning, as news centred on the spread of the coronavirus and modelling by the London School of Hygiene and Tropical Medicine, that projects more than 500,000 people in Wuhan, the epicentre of the outbreak might be infected by the time the virus peaks in two weeks.
The first week of February has been a tricky one. Markets have been driven by the ebbs and flow surrounding coronavirus headlines, intermixed with upbeat U.S. economic data and reports of economic stimulus from Chinese authorities.
Similar bumpy conditions are likely to prevail during the remainder of February, punctuated by the release of economic data impacted by virus inspired factory shutdowns, travel restrictions and in China’s case, Lunar New Year holidays.
In FX, the scenario outlined above has put the U.S. dollar and the DXY index front and centre on most traders' radars with a particular focus on the big dollar's status as a safe haven currency and following another round of strong U.S. economic data, including Fridays robust jobs report.
Technically, it was all one-way traffic for the DXY index last week, a trend that looks capable of continuing in coming weeks. The decline from the October 2019, 99.67 high to the 96.36, 31st of December low unfolded in three waves (abc) which implies it has been corrective. Fridays break/close above the Wave b high at 98.54 provides some confirmation the DXY’s correction is complete at the 96.36 low.
Combined with the impulsive nature of last week’s rally, there is enough evidence to suggest the DXY index should be able to retest the October 2019, 99.67 high, with risk towards 100.67. However, because the DXY, is subject to the ebbs and flows mentioned above, the safest entry for those looking to buy the DXY, would be via the next pullback, using the layer of support 97.80/70 which includes the 200-day moving average as the near term bullish reassessment level.
Source Tradingview. The figures stated areas of the 10th of February 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.