· The yuan dipped and the Australian dollar hit a six-week low on Wednesday as investors feared the outbreak of a new coronavirus in China could create more headaches for the Chinese economy, which is already slowing because of the U.S.-China trade war.
The yuan was steady after dipping earlier. It fell about 0.55% on Tuesday, its biggest decline in almost five months, in the onshore trade. It last stood at 6.9063 per dollar CNY=CFXS, almost flat on the day.
The Australian dollar, often used as a proxy bet on the Chinese economy, fell to as low as $0.6827, a trough last seen in mid-December, and last stood at $0.6837, down 0.13%.
The concerns surrounding the little-known virus propped up the safe-haven yen, which was firm at 109.98 yen JPY=, up from Tuesday's low of 110.23.
The euro stood little changed at $1.1083 EUR=.
Sterling traded at $1.3040 GBP=D4, having gained a tad on Tuesday after data showed the British economy created jobs at its strongest rate in nearly a year in the three months to November.
· 'Death Cross,' growth abroad threaten U.S. dollar
Storm clouds are gathering over the U.S. dollar, threatening a two-year rally in the currency that has squeezed corporate profits and angered President Donald Trump.
Analysts at Bank of America Merrill Lynch say the dollar triggered a so-called “Death Cross” on the last day of 2019. The bearish technical formation occurs when the 50-day moving average crosses below the 200-day moving average, something that has been followed by a period of dollar weakness in seven out of eight instances since 1980, the bank said in a recent report.
Easing worries over global trade and Brexit are stoking investor appetite for risk, pushing them out of safe haven assets like the dollar, said Mark McCormick, global head of foreign exchange strategy at TD Securities.
· EUR/USD RATE TECHNICAL ANALYSIS: DAILY CHART
EUR/USD rates remain in a broad ascending triangle dating back to August 2019, encompassed in a broader downtrend in place since May 2018. Accordingly, the outlook is appropriately neutral for longer-term traders.
For shorter-term traders, there may be opportunities within the ascending triangle – but more clarity is needed. EUR/USD rates are intermeshed within the daily 8-, 13-, and 21-EMA envelope and a daily candle is forming a bearish outside engulfing bar. Daily MACD is dangerously close to crossing below its signal line into bearish territory, and Slow Stochastics have fallen into oversold territory; momentum is tracking to the downside.
A break below the mid-December swing low at 1.1093 would constitute a break of the uptrend from the October and November swing lows as well. In trading below 1.1093, EUR/USD’s near-term bias would switch from neutral to bearish.
· The phase 2 trade deal with China would not necessarily be a “big bang” that removes all existing tariffs, U.S. Treasury Secretary Steven Mnuchin told The Wall Street Journal in an interview.
“We may do 2A and some of the tariffs come off. We can do this sequentially along the way,” he added.
Mnuchin also warned that Italy and Britain will face U.S. tariffs if they proceed with a tax on digital companies like Alphabet’s Google and Facebook, the newspaper said.
· The U.S. Senate voted early on Wednesday to approve rules governing the impeachment trial of President Donald Trump, including delaying a debate over whether to call witnesses until the middle of the trial.
With Republicans banding together, the Senate voted 53-47 to adopt the trial plan, which allows opening arguments from House lawmakers prosecuting the case to begin later on Wednesday.
· A temporary truce between the United States and France was reached Monday over France’s digital services tax and possible retaliatory tariffs from the US. The ceasefire on tariffs will continue until the end of the year according to a French ministry of finance official. French President Macron stated on Twitter yesterday that his discussion with President Trump was great and they will be working together to reach a deal and avoid escalation of tariffs. The Euro saw a spat of strength as news of the ceasefire crossed the wires but surrendered those gains into Tuesday trading.
· Italy’s Luigi di Maio will step down as leader of the co-ruling 5-Star Movement on Wednesday, a senior 5-Star source said.
Di Maio, who is also the government’s foreign minister, is expected to meet other ministers belonging to the anti-establishment movement later in the morning and is due to announce his resignation at a party meeting in the afternoon, several dailies reported.
· Thailand and Macau have confirmed coronavirus cases, according to the Xinhua news agency.
The virus could mutate and spread further, Chinese health officials have warned. The death toll in China has risen to nine with 440 confirmed cases.
· Oil prices eased on Wednesday, extending declines as the International Energy Agency (IEA) forecast a market surplus in the first half, helping ease concerns about disruptions that have slashed Libya’s crude output.
Brent crude was down 24 cents, or 0.4%, at $64.35 a barrel at 0309 GMT, after dropping 0.3% on Tuesday. U.S. oil fell 29 cents, or 0.5%, to $58.09 a barrel, having declined 0.3% the day before.
The head of the IEA, Fatih Birol, said on Tuesday he expects the market to be in surplus by a million barrels per day (bpd) in the first half of this year.
Reference: Reuters, CNBC, BullionVault
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