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Coronavirus worries continue to drive safe haven demand

jeffriess
January 27, 2020
by Joseph Jeffriess, Market Analyst

Yen, USD and Gold continue to rally to risk as markets deal with Coronavirus uncertainty.

Traders, I tried to ignore this as an influence into the end of last week, basically keeping one eye open. Today evidence continues to mount that Coronavirus is a market factor and is hitting risk sentiment. Please learn a mini-lesson from me on this, as a trader we need to be impartial, open and flexible. It’s dangerous to hold personal onesided views in the market. Markets are constantly evolving and changing based on new and redeveloping influences. Follow your plan but remain flexible and openminded!

Friday we saw heavy selling in Chinese markets to end the week as the impact of coronavirus continued to intensify. Today Chinese markets are closed for the Lunar New Year but other equity markets have seen heavy selling in today’s open as cases of infection continue to grow and the death toll has sadly been revised higher.

The Dow futures started Monday trade with heavy losses dropping by as much as 300 pts. CFD index markets that track the ins and outs of hours futures markets have also reflected the heavy selling. The HK50 down over 2% including the morning opening gap. The Nikkei is down 2.06% in today’s trade.

Currencies have also been affected with a strong move back to safe-haven currencies like the JPY and USD. The JPY is currently the strongest safe-haven currency. While the USD is trading higher to the risk majors like the AUD, EUR and GBP the JPY has gained 0.34% to the USD on open this morning. At the moment the majors are pulling back to the JPY. From Friday till today the AUD has dropped 0.99%, the EUR 0.57% and the GBP 0.85% to the JPY.

Oil has also been savaged dropping 4.92% since Friday’s open, ontop of Coronavirus, traders are also worried about oversupply in the market after last week inventories figure. Gold has been back in safe-haven mode adding around 1.20% since last Friday’s open. On the topis of safe-havens Bitcoin looks to have moved back to that status gaining 2.86% since last Friday. Please take a look at Bitcoin daily chart and compare it to Gold’s daily chart, do you think it’s becoming a safe-haven under certain circumstances?

We’re looking at the JPN225 daily chart today, we can see clearly the current level of worry that’s hitting equity indexes at the moment. This morning’s 0.94% gap gives you an idea of the uncertainty after the situation in China continues to escalate.

Good trading from Eightcap.
All times are AEDT.