February flight for the USD
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.
Share this:
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
Related tags:
Latest market news
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
Nasdaq Forecast: QQQ rises as Trump delays US involvement decision
U.S. stocks are pointing to a modestly stronger start on Friday amid the ongoing uncertainty surrounding the US involvement in the Iran-Israel war. As the conflict in the Middle East is entering a second week, President Trump said he will decide in the coming two weeks whether the US will get involved in attacking Iran's nuclear facilities. This has eased fears of an imminent attack.
Post-FOMC USD Price Action: Can the U.S. Dollar Follow Through?
It’s been a bearish year so far for the USD although the currency has generally shown bullish responses to FOMC meetings. The big question now is whether it can finally find some follow through or whether this is another rally that sellers will fade.
Dow Jones Forecast: DJIA subdued with the Fed & Middle East conflict in focus
U.S. stocks are set to open broadly unchanged amid rising tensions in the Middle East and ahead of the Federal Reserve's interest rate decision later today. President Trump and his team are evaluating several options, including potentially joining direct strikes against Iranian nuclear facilities. The Fed is expected to leave rates unchanged at 4.25% to 4.5%.
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.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX 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), StoneX Financial 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 StoneX Financial 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 StoneX Financial 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.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs 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 www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.