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·         The dollar and yen held broad gains on Wednesday, as U.S. oil’s return to positive territory from a historic plunge failed to calm market nerves, while the Australian dollar jumped on record retail sales figures.

The greenback sat just below a two-week peak against a basket of peers =USD and barely budged against commodity currencies whacked by the oil collapse.

 

The safe-haven Japanese yen JPY= held at 107.83 per dollar. The Australian dollar's AUD=D3 half-a-percent gain to $0.6354, following a record surge in retail sales last month, was an outlier and had begun to wind back by mid-session.

 

The greenback has gained about 0.6% this week on a basket of currencies and stands near multi-week highs hit on Tuesday against the krone, rouble and loonie.

 

The euro EUR= remained rangebound, holding at $1.0856, while the British pound GBP= held near a two-week trough after a gloomy assessment on Tuesday of recovery prospects from the Bank of England's chief economist.

·         EUR/USD Price Analysis: Market has turned indecisive

The EUR/USD market is lacking a clear directional bias as suggested by consecutive Doji candles created on Monday and Tuesday.

A Doji candle occurs when an asset sees two-way business during a specific period but ends that period on a flat note. It is widely considered a sign of indecision in the market place, although its effects depend on the context. A Doji after prolonged rally represents buyer exhaustion, while a Doji appearing after a notable sell-off is considered a sign of seller fatigue.

In EUR/USD's case, the consecutive Doji candles have appeared following last Thursday's downside break of the trendline rising from March 3 and April 6 low and indicate indecision among sellers.

As a result, the immediate bearish outlook stands neutralized. A break below the low of Tuesday's Doji candle would revive the bearish view and open the doors to a re-test of the 2020 low of 1.0636.

On the higher side, the high of Monday's Doji candle is the level to beat for the bulls.

·         EUR/USD keeps pointing to further rangebound – UOB

FX Strategists at UOB Group suggested EUR/USD should remain side-lined in the next weeks.

 

24-hour view: “We expected EUR to ‘trade sideways between 1.0830 and 1.0900’ yesterday. EUR subsequently dipped to 1.0817 before snapping back up to 1.0880. While the current movement is still viewed as part of a consolidation phase, the underlying tone has firmed somewhat and the risk from here is tilted to the upside. That said, any advance is expected to face solid resistance at 1.0900 (next resistance is at 1.0925). Support is at 1.0840 but only a move below 1.0815 would indicate the current mild upward pressure has eased.”

 

CORONAVIRUS CRISIS:

Ø  Total confirmed cases: More than 2,558,975

Ø  Total deaths: At least 177,704

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 819,175 (+431), and deaths: 45,343 (+25)

Ø  Spain cases: At least 204,178, and deaths: 21,282

Ø  Italy cases: At least 183,957, and deaths: 24,648

Ø  Thailand cases: At least 2,826, and deaths: 49

·         Global CEOs see U-shaped recession due to coronavirus –YPO survey

According to an April 15-19 poll of 3,534 chief executives from 109 countries conducted by YPO, a business leadership network, global leaders are bracing for a U-shaped recession, in the face of the coronavirus pandemic-led economic fallout.

 

“Around 60% of chief executives are preparing for a U-shaped recovery - a long period between recession and an upturn - compared with 22% who predict a double-dip recession.

·         Companies will shift supply chains away from China after coronavirus crisis, Mark Mobius predicts

Companies around the world will alter their supply chains to be less dependent on China in the wake of the coronavirus crisis, according to investor Mark Mobius.

 

Speaking to CNBC’s “Street Signs Europe” on Tuesday, Mobius, founder of Mobius Capital Partners, said the pandemic was already prompting a rethink among businesses as they sought to mitigate supply shocks from any future events of a similar scale.

 

Mobius noted that in the United States, there would “of course” be a preference for companies based in the U.S., or in more local overseas markets like Mexico or Canada.

 

“But at the end of the day, I think there’s going to be a diversification where these supply chains get moved into places like Vietnam, Bangladesh, Turkey, even Brazil, so that these companies can have a more diversified supply chain,” he added.

·         US-China relations at a low as ‘blame-shifting’ sets back war against virus

U.S.-China relations are at their “worst point in living memory,” according to a professor, who said both countries engaged in a “grand exercise in blame-shifting” over the coronavirus pandemic.

 

U.S. President Donald Trump has blamed Beijing for a lack of transparency over the true extent of the Covid-19 outbreak in China – where cases were first reported. In response, Beijing has suggested that the U.S. might be the real source of the global pandemic.

 

“U.S.-China relations are at their worst point in living memory for a number of decades probably since the 1970s, at the moment there’s a grand exercise in blame shifting going on, on both sides,” said James Crabtree, an associate professor at Singapore’s Lee Kuan Yew School of Public Policy. “Neither side wants to be blamed for their own response, so the Chinese and Americans are blaming each other.”

·         Gyms in China’s capital city of Beijing were forced to close again over the weekend, adding pressure to an industry that’s already seen the collapse of thousands of fitness businesses nationwide.

·         North Korean state media on Wednesday made no mention of leader Kim Jong Un’s health or whereabouts, a day after intense international speculation over his health was sparked by media reports he was gravely ill after a cardiovascular procedure.

·         Euro zone government debt will surge this year on the coronavirus pandemic, but while another debt crisis is unlikely, large differences in indebtedness as countries emerge from the downturn could seriously test their unity.

The International Monetary Fund expects debt in the 19 countries sharing the euro to jump by more than 13% of GDP to 97% this year as Europe-wide lockdowns cause an unprecedented 7.5% euro zone recession. But despite massive expected borrowing, the effect on yields has so far been small.

 

The biggest difference compared to the euro zone debt crisis of 2010-2012 is the ECB. Then, there was no unconditional ECB pledge to do “whatever it takes” to support the euro. As soon as it was made, in mid-2012, the crisis ended.

 

The key risk is political: to stay intact, the euro zone must not allow nationalist and eurosceptic parties in the South to capitalise on the hardships of recovery with huge debt levels and swing public opinion against the EU, economists said.

 

The backlash could take the form of popular resentment in Italy at its relatively limited ability to respond to the epidemic compared with Germany or the Netherlands.

·         Australia said on Wednesday it would allocate A$94 million ($59 million) to buy oil to store in the U.S. Strategic Petroleum Reserve, taking advantage of historically low oil prices to build up its emergency stockpile.

·         Europe Inc’s profit expectations for the second and third quarters continued to deteriorate sharply, Refinitiv data showed on Wednesday, as fears about the scale of the recession triggered by the coronavirus outbreak continue to grow.

Companies listed on the pan-European STOXX 600 are now expected to report a 37% decline in earnings in the second quarter, down from a 34.2% drop forecast the week before.

 

For the third quarter, analyst expectations are now set for a 27.6% fall in earnings versus 25.5% a week ago.

·           Brent hits century's low; ECB to discuss junk bonds – Gold to hit $2000

Brent oil has tumbled to a 21-year low and touched this century’s low. The spread between the US Crude and Brent has started to narrow. Nonetheless, the chances of Brent falling to zero, or below zero, are minimum. Having said this, the sell-off in oil is brutal, and it is highly likely that we are close enough to find a bottom.

 

The sell-off that has been trigged in the Brent prices today is highly likely to put more pressure on OPEC+ to cut the oil production more. Of course, it will be Suadi Arabia that needs to cushion the additional burden.

 

I believe it is likely that we may see another emergency meeting becoming a reality within a week from today because the realism is that Saudi Arabia’s economy is heavily dependent on oil, and the COVID-19 situation has already left a massive dent on its economy. It is in Saudi Arabia’s favor to push other members to a table and discuss the oil production cut. The moment one sees those production cut chatter changing into a reality – an actual meeting, I think it may not be a bad idea to start putting the long bets once again.

 

ECB and Junk Bonds

Back in Europe, it is all about the junk bond’s discussion when it comes to the ECB’s call scheduled today. The Fed has jumped into a high yield space, and traders are hoping that the ECB will follow their footprint. It is expected that some favourable announcement will be made concerning junk-rated debt.

 

Countries like Italy have been hit the most due to Coronavirus, and there is a mammoth amount of junk-rated debt that no one wants to use as collateral.

 

Companies with junk-rated debt are trapped in a liquidity trap, and if they aren’t bailed out, the number of bankruptcies will spike. The higher the bankruptcies, the higher the structural issues due to a surge in unemployment numbers.

 

S&P Global Ratings is expected to announce its decision on Italy’s credit rating on Friday, and currently, it is two notches above the investment grade. If the rating agency downgrades the country’s rating, it is likely to exclude the third biggest economy of the eurozone from the ECB’s asset purchase program.

 

The bottom line is that the meeting is likely to bring higher volatility for the Euro, and we could some intriguing price action for the STOXX600 index as well.

 

·         WTI bears dominate below $11 as risk-off continues, EIA data eyed

Technical analysis

 

In addition to the March month bottom close to $19.25, 21-day SMA around $20.60 also limits the energy benchmark’s immediate upside. Alternatively, sellers may target $10 psychological mark as immediate support ahead of plunging towards near zero levels.

 

Looking forward, the weekly official Crude Oil Stocks Change from the Energy Information Administration (EIA), expected 16.133 million barrels versus 19.248 million barrels, will be the key to watch.

·         Reuters is out with the latest update on the OPEC and non-OPEC producers (OPEC+) conference call held on Tuesday to discuss the meltdown in the US oil futures and its implications on the oil market.

Key takeaways

“No fresh policy moves agreed to or floated out publicly.

Unless there is some sort of dramatic recovery in price, which appears unlikely, they'll remain under pressure to do more.

·         Oil prices slumped again on Wednesday, with Brent falling to the lowest since 1999, as the market struggled with a massive crude glut amid a collapse in demand for everything from gasoline to jet fuel caused by the coronavirus outbreak.

Brent crude LCOc1, which fell 24% in the previous session, touched $15.98 a barrel, its lowest since June 1999. It was trading down $2.37, or 12%, at $16.96 at 0511 GMT.

 

West Texas Intermediate CLc1 was down 51 cents, or 4.4%, at $11.06 a barrel.