Overnight on Wall Street: Tuesday 28/01/2020

The deadly pneumonia-like virus is adding another layer of uncertainty in the markets. Major US equity indices fell by more than 1% for the first time this year with tourism and travel-related stocks hit the hardest.

Investors fret that China is under-reporting the virus cases and those affected can be much more than the official count.

• Dow Jones Average Industrial lost 454 points to finish at 28,536.
• S&P500 ended 1.6% lower at 3,244.
• Nasdaq Composite erased 1.9% to close at 9,140.

The global sell-off is coming at a time where investors were cautiously optimistic on the geopolitical and economic outlook which were showing some signs of improvement. The fears of a global pandemic have dented sentiment.

Currency Markets

In the FX market, Japanese Yen, Swiss franc and US dollar were among the best performers in a risk-aversion environment.

US Dollar Index

The index tracking the performance of the greenback against a basket of currencies- EUR, JPY, GBP, CHF, CAD and SEK edged higher for the third consecutive trading days and is trading above 97.70.

US Dollar Index (Daily Chart)

Source: GO MT4

AUDUSD

The Aussie dollar suffered the most as traders reacted to the concerns of a given the close ties between the two countries. The AUDUSD pair erased more than 60 pips and dropped below the 0.68 level.

AUDUSD (Hourly Chart)

Source: GO MT4

Commodities

Oil traders are already concerned with a supply glut and a weakening demand. The fears of a rapid spread of the coronavirus somewhat add additional concerns on the demand outlook. Both WTI and Brent Crude continue to suffer heavy losses.

As of writing, WTI and Brent Crude are trading in the vicinity of $56 and $62 respectively.

USOUSD and UKOUSD (Daily Chart)

Source: GO MT4

Monday kicked off with a bullish gap for the yellow metal as investors sought safety with safe-haven assets. Both the US dollar and the Gold are moving in tandem – an alignment which is unusual but occasionally occurs during periods of heightened uncertainties.

Investors are navigating in an environment where despite easing trade tensions and receding fears of economic recession, uncertainties persist. The balance of risks is causing money to flow in both the US dollar and Gold.

As of writing, the XAUUSD pair is trading in the vicinity of $1,580 as a stronger greenback toned down the rally.

XAUUSD (Hourly Chart)

Source: GO MT5

Key upcoming events

Durable goods, Nondefense Capital Goods, S&P/Case – Shiller Home Price and Consumer Confidence (US)
ECB’s Lane Speech (Eurozone)

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