As we know now, the Corona-virus is getting everyone scared and the sentiment has been pretty negative in the last couple of weeks. Risk assets such as stock markets have turned bearish, while safe havens such as Gold and the JPY have turned bullish. Yesterday the risk mod wasn’t as bad, although it still remained negative and the decline in risk assets kept sliding lower. Today, markets seems more balanced, although that’s due to the uncertainty form the corona-virus which will likely hurt the Chinese economy, as Chinese economists suggested, the global economy and the FED, which will be meeting this evening.

The FED is expected to stay on hold again this month, although we some participants/economists see another interest rate cut this year, but it won’t be today. We also saw a jump in crude Oil a while ago, after reports of a Houthi missile attack on Saudi Arabia’s Aramco facilities. But, the uncertainty prevailed over that and crude Oil is turning bearish again now. The earnings reports from US companies are being released today and Boeing disappointed by announcing cuts to its 787 production rate; pre-market shares were dragged lower as a result.

The European Session

• BOJ Kuroda Still Trying to Remain Optimistic – The Bank of Japan governor Kuroday was speaking early this morning. He said that the BOJ is still continuing efforts to hit 2% inflation target as soon as possible. But it is a futile and impossible task for Kuroda sadly and he knows the BOJ won’t reach their target for a very long time.
  
• German GfK Consumer Climate and M3 Money Supply –  Earlier today, some economic data from Germany and the Eurozone was released and it leaned more on the positive side, but the euro keeps declining nonetheless.
  • German GfK Consumer Climate – 9.9 points against 9.6 expected,
  • Prior 9.6 which was revised higher to 9.7 points
  • German December Import Prices – 02% as expected,. down from 0.5% in November
  • M3 Money Supply y/y – 5.0% against 5.5% expected, down from 5.6% previously
  • Private Loans y/y – 3.7% against 3.5% prior and expected
• ECB Still Has Easing Tools for Rehn – The Euro has turned quite bearish again this month, with EUR/USD losing around 250 pips from the top. We have seen some green shots from the economic data recently, which the ECB acknowledged, but certain sectors are still in recession. So, they stand ready to ease again if necessary. ECB governing council member, Olli Rehn, made a few comments earlier pointing to further easing, if need be:
  • We have not run out of monetary policy tools
  • If we need to strengthen policy, we still have the tools to do so
  • Current data shows September decision has had positive impact on banks’ profitability
• China’s Economy Might Suffer from Corona-Virus – After Wuhan, Beijing health official says that risks of corona-virus infection in the city is rising. China president Xi Jinping said later that preventing, containing the virus remains a severe and complex task. Government economist in China came to the conclusion that Q1 growth may fall below 5% on corona-virus outbreak.

The US Session

• US December Prelim Wholesale Inventories –  The wholesale inventories and retail inventories report for December was released a while ago from the US. below are the details:
  • Wholesale inventories -0.1% versus +0.1% estimate
  • wholesale inventories prior month -0.1% revised
  • retail inventories for December 0.0% versus +0.1% estimate
  • retail inventories prior month -0.8%. Unrevised.
  • Durable goods inventories fell -0.2% versus -0.4% decline last month
  • nondurable goods inventories rose by 0.1% versus a +0.9% gain last month
  • retail inventories excluding motor vehicle parts came in unchanged versus -0.3% last month
  • motor vehicles and parts dealers also came in unchanged versus -1.8% last month
• More Tensions in the Middle East? – Crude oil futures were trading higher earlier today, on the back of reports of a Houthi missile attack on Saudi Arabia. The Houthi movement, officially called Ansar Allah and colloquially simply Houthis, is an Islamic political and armed movement that emerged from Sa’dah in northern Yemen in the 1990s. But, the climb has ended now and Oil has resumed the bearish trend, so nothing major I assume.
• FED Meeting – The FED meeting will take place later this evening and there is almost no doubt that the Fed will leave monetary policy unchanged later today and the statement is expected to repeat the language seen back in December. The Fed should reaffirm “moderate growth” and the fact that the inflation outlook hasn’t changed will continue to leave them alluding to be more data dependent.

Trades in Sight

Bullish GOLD

• The retrace lower is over on H4 chart
• The trend has ben bullish this month
• MAs have turned into support
• The sentiment is still negative

The pullback lower is complete now

Gold has been mostly bullish in 2019 as the sentiment has been mainly negative, due to an escalating trade war and a slowing global economy. This year the bullish trend resumed again and we saw some major moves to the upside, especially as tensions between US and Iran increased in the Middle East. Tensions decreased after the US didn’t follow through after Iran’s attack on US military bases in Iraq. As a result, Gold retreated lower, but it still remained above the 100 SMA (green) on the H4 chart and once that moving average approached close enough, buyers became confident and the upside momentum resumed again.

The outbreak of the corona-virus in China turned the sentiment negative again in financial markets and fear turned the attention to safe havens again. As a result, Gold turned bullish again and this time the 50 SMA (yellow)turned into support on this time-frame. Yesterday we saw a retrace lower, but the 50 SMA held well and today the price is moving higher again. So, Gold is pretty bullish and will remain so as long as the corona-virus fears remain. Therefore, retraces lower are good opportunities to buy Gold.

In Conclusion

Today the sentiment is not as bad as in the last couple of weeks, so the decline in risk assets is not as big, but it remains slightly negative. The uncertainty is also pretty high, while the FED will hold its meeting in the evening, so traders are a bit on standby.