19 Mar: Rush for cash sends US$, yields soaring, while stocks collapse yet again. RBA to cut rates today? QE? Probably.

19 Mar: Rush for cash sends US$, yields soaring, while stocks collapse yet again. RBA to cut rates today? QE? Probably.

Wednesday has been another sea of red as stockmarkets, bonds and commodities all fell hard in a simultaneous selloff as investors scrambled to raise cash to buffet themselves against the widening economic damage caused by the coronavirus pandemic. The big winner was the US$, which climbed by another 1.5%,  up 3% over the last 2 days, as the coronavirus-related economic risks continue to downgrade global economic growth expectations, fueling a rush to stockpile dollars and propping it up against all counterparties  even as global central banks proffer liquidity.

In the stock markets, the US indices have fallen by between 5.5%/6.5%, albeit well off their lows, at one stage down by around 10% and in the process wiping out nearly all the gains since Donald Trump was inaugurated. The DJI has closed below 20000 for the first time since early 2017, at 19900, but at one stage on Wednesday the index fell to 18700. Yields on the one-month US Treasury bill briefly turned negative for the first time in almost five years, while the US10Y is now at 1.2%. Oil prices collapsed to the lowest level since 2002 (20.50). At one stage the price was down by 25%, although ended the day down by 16%, currently at 22.85pb.

In the FX markets it was all about the strength of the US$. In a highly volatile session, the DXY reached a 3 year high of 101.74, before profit taking set in to drive it back to 101.00. The Euro collapsed to a low of 1.0800 ahead of a decent bounce to currently sit back above 1.0900. The weakest currencies were once again the Aud$ and the Nzd$, with the AudNzd cross briefly breaching parity for the first time ever. With a busy session ahead for Australian data and the RBA, further downside pressure for both currencies may lie in store. Cable had another terrible session, falling by 4.9% at one stage to a low of 1.1445, ahead of a dead-cat bounce to sit back above 1.1500. The charts no longer have the long term data to record the price action, but the way that it is going, the all time low of 1.0080 in Feb 1985 does not seem out of the question.

In the bigger picture, the strength of the dollar will now create further economic issues, with both commodity and emerging markets especially vulnerable as they try to cope with collapsing currencies and plunging demand. Investors are now fleeing the emerging markets in droves and are piling into the US$, with the 2 recent emergency interest-rate cuts by the Fed doing nothing to diminish the dollar’s appeal.

Looking ahead, Thursday will kick off with the NZ Q4 GDP – pre coronavirus – so the expectations are positive @ +0.5%qq/+1.8%yy. This will be followed by the Japan CPI (exp +0.9%yy) and then a busy day for Australia, beginning with the February Unemployment (exp 5.3%, +10K) and the RBA Bulletin at which a 25bp rate cut – and possible the commencement of a QE programme – are likely to be announced.  How much use any rate cut will be remains doubtful but any move will then be followed by a late afternoon speech (4pm AET) from Governor Philip Lowe. Europe will see the Interest Rate Decision from the SNB at which some sort of easing is widely expected, while from the US we get the March Philadelphia Fed Mfg Survey and the weekly Jobless Claims. Have a good day.

Market moves, in brief:

FX: DXY 100.91 (+1.42%)

Bonds: US10Y; 1.188% (+9.73%), German 10Y; -0.228% (+47.5%), UK 10Y; +0.797% (+43.70%), Australian 10Y; +1.209% (+16.07%), NZ 10Y; +1.479% (+17.49 %), China 10Y; 2.783% (+1.18%)

Stock Indices: DJI; -6.30%, S+P; -5.18%, NASDAQ; -4.70%, EUStoxx50; -5.72%, FTSE100; -4.05%, Shanghai Composite; -1.83%, ASX200: -8.81%

Metals: Gold $1486 oz (-2. 75%), Silver $11.98 oz (-5.03%), Copper $2.162 lb (6.55%), Iron Ore $90.44 per tonne (NYMEX) (+0.54%),

Oil: WTI $22.33 pb (-16.66%)

Economic data highlights will include:

Thur: NZ Q4 GDP, Japan CPI, Australian Unemployment, RBA Governor Lowe Speech, RBA Bulletin,  BOJ Interest Rate Decision/Statement, Press Conference, SNB Interest Rate Decision/Statement, Press Conference, US Jobless Claims, Philadelphia Fed Mfg Survey,

CURRENCIES
EURUSD: 1.0912
Res  1.0955  1.0995  1.1040
Sup  1.0875  1.0840  1.0800
USDJPY: 108.03
Res  108.30  108.70  109.00
Sup  107.75  107.40  107.00
GBPUSD: 1.1607
Res  1.1650  1.1700  1.1750
Sup  1.1555  1.1500  1.1445
USDCHF: 0.9675
Res  0.9715  0.9750  0.9780
Sup  0.9650  0.9615  0.9580
AUDUSD: 0.5784
Res  0.5865  0.5940  0.6025
Sup  0.5700  0.5620  0.5535
NZDUSD: 0.5750
Res  0.5780  0.5810  0.5840
Sup  0.5720  0.5695  0.5660
INDICES / COMMODITIES
S&P.fs: 2384.03
Res  2460.00  2610.00  2535.00
Sup  2335.00  2260.00  2185.00
DJ30.fs: 19736.00
Res  20200.00  20560.00  20935.00
Sup  19515.00  19170.00  18765.00
SPI200.fs: 4794
Res  4845  4900  4950
Sup  4750  4700  4650
XAUUSD: 1490.24
Res  1500.00  1520.00  1510.00
Sup  1475.00  1465.00  1455.00
XAGUSD: 12.04
Res  12.30  12.70  13.10
Sup  11.65  11.25  10.85
WTI.fs: 22.81
Res  24.00  25.00  26.00
Sup  21.75  21.00  20.00

Trend Table:

There really is not a lot to say today as the flight to safe haven means another sea of red for all safe haven assets. The charts generally suggest that this is likely to continue. In the FX markets, the Aud, Nzd and Cable all look particularly vulnerable but the US$ seems set to make further gains on all fronts. In the crosses trading the Jpy and Chf from the long side and the Aud, Nzd and Gbp from the short side still seems to be the plan.

The Stock markets still look dire and I don’t think we are nearly done yet with the downside moves but the charts are increasingly oversold, so the bounces will be increasingly vicious. Trading with a very nimble stance is required and gearing levels should remain low.

EURUSD USDJPY GBPUSD USDCHF AUDUSD NZDUSD
1 Hour Oversold – Turning higher? Bearish Divergence Down – Oversold Possible Topping Formation Down – Oversold Down
4 Hour Down Turning Higher Down – Oversold Turning Higher Down – Oversold Down – Oversold
1 Day Down Up Down Turning Higher Down Down
1 Week Neutral Neutral Turning Lower? Neutral – Turning Higher? Down Turning Lower

 

DXY S+P ASX200 GOLD SILVER OIL_WTI
1 Hour Possible Topping Formation Bullish Divergence Bullish Divergence Neutral – Turning Lower? Turning Neutral Possible Basing Formation
4 Hour Up Bullish Divergence Bullish Divergence Neutral – Turning Higher? Bullish Divergence Turning Lower
1 Day Up Down – Oversold Down – Oversold Down Down Down – Oversold
1 Week Neutral – Turning Higher? Down Down Turning Lower Neutral – Turning Lower? Down

 

EURJPY EURGBP GBPAUD AUDJPY EURAUD AUDNZD
1 Hour Turning Neutral Up Neutral Down Up Neutral – Turning Lower?
4 Hour Turning Neutral Up Neutral – Turning Lower? Down Up Possible Basing Formation
1 Day Turning Neutral Up Up Down Up Turning Neutral
1 Week Neutral Neutral – Turning Higher? Neutral – Turning Higher? Down Up Turning Lower?

Chart of the Day:

The Euro looks very heavy in face of the rampant US$, and as the 4 hour chart shows, the pair are carving out a more or less perfect head/shoulder formation which, having now emphatically broken the neckline at 1.1040, has a measured objective of 1.0620.  Aggressive traders could sell the Euro at current levels, or the more conservative stance maybe to allow for a bounce towards 1.1000, with a SL placed around 100points above that, possibly just above 1.1100.

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