· The dollar found support on Monday as global growth fears hit oil prices and commodity currencies, while the New Zealand dollar rose on news that the government will begin to relax strict virus containment measures from next week.
The dour mood weighed on riskier Asian currencies and pushed the Australian dollar a touch lower. But the kiwi jumped 0.5% after New Zealand Prime Minister Jacinda Ardern said a gradual roll back of lockdown rules would begin on April 27.
The Australian dollar AUD=D3 sat at $0.6354, about 1.5% below a month-high hit last week, while the kiwi NZD=D3 hit a three-session high of $0.6059.
Moves in other majors were modest, but together with cautious trade in regional equities markets seemed to cap a few weeks of risk appetite and dollar softness.
The dollar was a tad firmer on other majors, gaining about 0.1% on the euro and pound and 0.3% on the Japanese yen. It last bought 107.80 yen JPY= and traded at $1.2478 per pound GBP= and $1.0870 per euro EUR=.
· EUR/USD short-term technical outlook
The EUR/USD pair heads into the weekly opening trading at 1.0870, and it has met sellers on Friday around the 50% retracement of its latest bullish run at 1.0890, an immediate resistance level. The daily chart shows that, while technical indicators have picked up, they remain within negative levels, lacking strength enough to confirm another leg higher. The pair is below all of its moving averages, although the 20 SMA lost its bearish strength. In the shorter-term, and according to the 4-hour chart, the pair is neutral-to-bearish, as a bearish 20 SMA converges with the mentioned Fibonacci resistance while below the larger ones. Technical indicators, in the meantime, remain below their midlines. Bears could have better chances on a break below 1.0830, the 61.8% retracement of the same rally.
Support levels: 1.0830 1.0800 1.0765
Resistance levels: 1.0890 1.0925 1.0960
· EUR/USD Forecast: Near-term bias still seems tilted in favour of bearish traders
From a technical perspective, the pair las week confirmed a break through a multi-week-old ascending trend-line support extending from YTD lows set in March. However, it will be prudent to wait for some follow-through weakness below the 1.0815-1.0810 region before positioning for any further depreciating move. Below the said support, the pair is likely to accelerate the slide further towards monthly lows, around the 1.0770-65 region, before eventually falling further towards testing sub-1.0700 levels.
On the flip side, immediate resistance is now pegged near the 1.0900 round-figure mark. Some follow-through buying might trigger a short-covering move, albeit seems more likely to confront a stiff resistance and remain capped near 50-day SMA, currently around the 1.0960 region. That said, a convincing break through might negate the bearish outlook and set the stage for a move beyond the key 1.10 psychological mark.
· USD/JPY Price Analysis: Bid near 107.80 with descending triangle breakout on 4H
USD/JPY is flashing green near 107.80 at press time with the American dollar drawing bids amid renewed risk-off tone in the equity markets.
The currency pair could rise further as the 4-hour chart is now reporting a descending triangle breakout, which comprises trendlines connecting lower highs and horizontal supports.
The pattern indicates a resumption of the rally from the March 9 low of 101.18 and suggests scope for a move above 108.00.
Alternatively, a move under 106.92 – the base of the triangle – would signal an extension of the pullback from the March 25 high of 111.68 and could yield a drop to 105.00.
The prospects of a downside break under 106.92 would improve if the pair drops under 107.30, validating Friday’s red candle.
CORONAVIRUS CRISIS:
Ø Total confirmed cases: More than 2,414,595
Ø Total deaths: At least 165,174
Ø The coronavirus COVID-19 is affecting 210 countries and territories around the world and 2 international conveyances: the Diamond Princess cruise ship harbored in Yokohama, Japan, and the Holland America's MS Zaandam cruise ship.
Ø US cases: At least 764,265, and deaths: 40,565
Ø Spain cases: At least 198,674, and deaths: 20,453
Ø Italy cases: At least 178,972, and deaths: 23,660
Ø Thailand cases: At least 2,792 (+27), and deaths: 47
· New Zealand will extend the lockdown measures in place to beat the coronavirus by a week, after which it will move to a lower level of restrictions, Prime Minister Jacinda Ardern said on Monday.
· The coronavirus crisis will likely lead to the largest ever decline of global carbon emissions on record, according to research from Goldman Sachs, illuminating the potential for a long-term low carbon recovery.
The Covid-19 outbreak has meant countries around the world have effectively had to shut down, with many governments imposing draconian restrictions on the daily lives of billions of people. To date, confinement measures have been implemented in 187 countries or territories in an effort to try to slow the spread of the pandemic.
Analysts at Goldman Sachs said in a research note that they expect energy-related carbon emissions (which account for two-thirds of total greenhouse gas emissions) to fall by at least 5.4% this year alone.
“Energy-related emissions have always rebounded post crisis,” analysts at Goldman Sachs said, citing data which showed carbon intensity improvements in the year after every major crisis since the 1970s.
“This time could be different as we have potentially already reached peak energy-related carbon,” they added.
Total global greenhouse gas emissions were estimated to peak around 2030, according to the Intergovernmental Panel on Climate Change’s most aggressive current policy estimates.
However, research from the IEA published in early February found global energy-related carbon emissions had already started to flatten, potentially leading to a peak in global greenhouse gas emissions a decade early.
· Coronavirus could push Americans to lobby for a social safety net like Europe’s, experts say
The coronavirus crisis could be the historical event that sparks a socially-conscious shift in Americans’ political priorities, experts told CNBC.
Speaking to CNBC via telephone, Morgan Housel, partner at venture capital firm Collaborative Fund and author of “The Psychology of Money,” said the U.S. had historically not faced any localized destruction deep enough to prompt a widespread shift in thinking. Although he noted the exception of Pearl Harbor and the huge human toll experienced during the Second World War.
“So I think Americans were just more open to saying, ‘no, I want to swing for the fences and take risks, I don’t need a safety net,’” he explained.
However, the devastation wrought by the coronavirus could push U.S. voters to favor policies supporting social security measures like universal health care or stronger retirement schemes, according to Housel.
“I think maybe this is going to push the United States closer to where Europe has been for the last 60 years in terms of wanting a deeper and more structured social safety net than we currently have right now,” he told CNBC.
· Analysts at Natixis look at the structural changes to economies that the coronavirus crisis is likely to bring about in the medium-term.
Key quotes
“Macroeconomic effects: higher inflation and corporate debt and excess savings over investment.”
“Microeconomic effects: different sectoral structure of the economy, higher financial market volatility and higher risk premia on risky assets.”
· Southeast Asia could be the next coronavirus hot spot
The number of coronavirus infections in Southeast Asia has risen quickly in recent weeks, with mounting worries among experts that the region could turn into a hot spot for the fast-spreading disease.
The region as a whole has reported more than 28,000 cases as of Sunday, according to data by Johns Hopkins University. Collectively, Indonesia, the Philippines, Malaysia and Singapore account for 87.9% of total cases reported in Southeast Asia, the data showed.
· China cut its benchmark lending rate as expected on Monday to reduce borrowing costs for companies and prop up the coronavirus-hit economy, after it contracted for the first time in decades.
The one-year loan prime rate (LPR) CNYLPR1Y=CFXS was lowered by 20 basis points (bps) to 3.85% from 4.05% previously, while the five-year LPR CNYLPR5Y=CFXS was cut by 10 bps to 4.65% from 4.75%.
· With economy in crisis, U.S. lets importers delay some tariff payments
The Trump administration on Sunday said it would allow importers hit by the national health crisis to defer for three months any tariff payments they owe the government.
The measure aims to help businesses hit by the coronavirus pandemic, which has put millions of Americans out of work and is widely seen pushing the economy into a deep recession.
President Donald Trump signed an executive order allowing deferred payments to “protect American jobs and help these businesses get through this time,” Treasury Secretary Steven Mnuchin said in a statement.
Still, the tariff deferment policy does not extend to importers of goods caught up in several trade conflicts, the Treasury Department said.
Importers of some goods the Trump administration has targeted in trade disputes - including solar panels, steel, aluminum and a range of Chinese products - will still need to pay tariffs on time, the department said.
· Japan’s exports slumped the most in nearly four years in March as U.S.-bound shipments, including cars, fell at the fastest rate since 2011, highlighting the damage the coronavirus pandemic has inflicted on global trade.
Adding to worries the world’s third-largest economy is sliding into recession, Ministry of Finance data showed Japanese exports fell 11.7% in the year to March, compared with a 10.1% decrease expected by economists in a Reuters poll.
That followed a 1% fall in February and marked the biggest decline since July 2016, as shipments to Japan’s major export destinations from China, the United States to Europe were all battered.
· Crude Oil Technical Outlook
Zooming in on the daily chart, WTI is facing key support from 18 years ago which makes for a barrier between 17.80 to 17.12. Taking this area out in the week ahead exposes the cheapest price since 1998 at 10.65 which would also bring oil on the cusp of revisiting single-digit prices. Guiding the commodity lower appear to be two falling trend lines labeled “inner” and “outer” resistance – pink lines.
Taking out the former may not necessarily overturn the dominant downward bias. I would like to see a push above “outer” resistance for there to appear a meaningful shift in oil’s trajectory. Yet there is quite noticeable positive RSI divergence, a clear sign that downward momentum is running out of steam. That can at times precede a turn higher perhaps as prices revisit the current April high at 29.10.
Should the latter occur in the week ahead, that would also mean a push above “inner” resistance which could set prices on their way towards testing “outer” resistance. But from a fundamental standpoint, that may entail some combination of further efforts to reduce supply or see nations dive into easing social distancing measures. The latter is also no guarantee that virus cases don’t resurface and carries numerous uncertainties.
· US crude dives more than 20% as coronavirus pandemic ravages oil demand
U.S. crude prices plunged in afternoon Asian trade on Monday as traders continued to fret over a slump in demand due to the coronavirus pandemic — and one analyst described the situation stateside as “quite dire.”
Prices on the May contract for West Texas Intermediate crude futures tanked 18% to $14.93 per barrel. Earlier on, WTI fell to $14.47 per barrel — its lowest level since mid-March 1999 when it traded for as low as $14.40 per barrel. Meanwhile, international benchmark Brent crude futures edged 2.3% lower to $27.43 per barrel.
ANZ’s Daniel Hynes told CNBC’s “Squawk Box” on Monday that one of the reasons behind the “crater” in U.S. crude prices was the impending expiration of the May futures contract, set to happen on Tuesday, according to Refinitiv. The June WTI contract fell more than 5% to $23.67 per barrel.
Reference: Reuters, Worldometers, FX Street
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