Forex Today: Coronavirus woes flag recession risks across Asia as China stimulus calms nerves

Amid the rising death toll and new coronavirus cases reported in China, the support measures implemented by Beijing reassured investors. The Asian equities edged back towards a three-week high amid a better market mood while S&P 500 futures also gained 0.25%. However, the US Treasury yields traded modestly flat, which left the US dollar broadly subdued, still close to multi-month highs.

In currency markets, AUD/USD caught a fresh bid-wave and jumped towards 0.6740 after the Chinese central bank pumped in CNY300 billion into the system to cushion the blow from the negative economic impact of the coronavirus outbreak. The Kiwi, however, failed to cheer the Chinese stimulus, as New Zealand’s PM Arden’s downbeat comments on the economy weighed and dragged the rates back in the red around 0.6430 region.

USD/JPY remained supported around 109.85 levels amid growing Japan’s recession risks and upbeat risk tone. Japanese Oct-Dec GDP disappointed markets big time, as a sales tax hike and weaker consumer spending amid coronavirus spread dented growth. The recession risks also loomed for Singapore’s economy while Thai economic growth slipped to a five-year low. Meanwhile, EUR/USD attempted a corrective bounce on the 1.08 level while the cable traded almost unchanged around 1.3050 amid thin trading conditions on account of President’s Day in the US.

On the commodities’ front, oil prices steadied amid fading hopes of an emergency OPEC+ meeting this month and ahead of the US weekly crude stocks data. Gold held near a two-week high, as uncertainty prevailed over the economic impact of the virus outbreak amd implementation of the US-China phase one trade deal.

Main Topics in Asia

China/US carry out phase one deal despite complications – Global Times

Brexit: Britain and EU 'will rip each other apart' in trade talks – The Guardian

GAC releases new measures to maintain market stability – China Daily

China's Hubei province confirms another 1,933 new cases of coronavirus / 100 new deaths

Japanese GDP SA (QoQ) Q4 -1.6% (est -1.0%; prev 0.1%; prev 0.4%)

China pledged to roll out more effective stimulus – Bloomberg

Japan’s Nishimura: Govt will swiftly implement emergency steps to counter coronavirus

Moody's: Coronavirus dents optimism just as global economy showed signs of stabilization

PBOC injects CNY 200 billion via one-year MLF on Monday

Singapore cuts 2020 GDP forecast to 1.5% as virus poses recession risk

NZ PM Arden: Forecasts are for virus to hurt economy in H1, rebound in H2

IMF’s Georgieva: May cut global growth forecast over coronavirus outbreak

BOJ’s Kuroda: Will not hesitate to take action if needed amid coronavirus uncertainty

Key Focus Ahead       

After an eventful Asian session, the EUR economic docket remains relatively quiet amid an  absence of the first-tier macro releases. Therefore, the coronavirus updates led risk sentiment will continue to remain the main market motor while the focus will also remain on the USD dynamics.

However, the Eurozone Construction Output data and German Buba monthly report will also offer some incentives to the EUR markets.

There is nothing much of note to report in the NA session, as both the US and Canadian markets are closed in observance of their respective national holiday.

EUR/USD: Speculators are their most net short since June 2019

The bearish sentiment around the EUR/USD pair is currently at its strongest in eight months. The path of least resistance is to the downside, but signs of risk reset may yield a minor bounce.  Short-term technical studies are now reporting oversold conditions. 

GBP/USD awaits Brexit clues to stay above 1.3000 after Friday’s Dragonfly Doji

GBP/USD stays on the back foot near mid-1.30s ahead of the London open on Monday. While pessimism surrounding the upcoming Brexit talks have been weighing over the pair, the US dollar pullback and an absence of major catalysts keep the traders calm off.

Chart Of The Week: AUD/USD bulls advancing in bullish descending triangle within weekly support

AUD/USD has fallen into weekly support, with room for a bullish correction in the near-term. Bullish prospects seek out a test of a congested area of moving averages.

Should forex traders watch governments and ignore central banks? Examining USD, EUR, GBP

More debt, more value? Currencies are moving not on higher interest rates but rather in response to growing government liabilities.