EURUSD and German 30 Index

Markets are again on the front foot this morning after breaking the Friday losing streak, on a weekend where US Markets will remain closed until Tuesday to mark President’s Day today. The boost in markets has been supported by more Chinese Fiscal and Monetary intervention as the PBOC conducted an MLF totalling 200B yuan today with a rate of 3.15% versus 3.25% previously. The term of the Medium-term Lending Facility was set for 12 months. This came as the economic impact from the spread of the cornonavirus deepens. The number of reported in China has now exceeded 70,000 with 1,770 fatalities. A spokesperson from the Chinese National Health Commission said that the “measures China has adopted to rein in the spread of the coronavirus are starting to have an impact”. There are also reports that Japanese auto manufacturers are restarting production in China today, with Toyota reopening 2 facilities. Mazda has also restarted a Chinese factory after a shutdown that has been implemented to prevent the spread of the virus. China is also reportedly proposing a delay in holding the National People’s Congress meeting that was due to convene next Monday. The IMF Managing Director Kristalina Georgieva has said in an interview over the weekend that they expect the global economy to suffer damage this year but that a sharp and rapid rebound could follow. She said that, "There may be a cut that we are still hoping would be in the 0.1-0.2 percentage space" but the full impact of the spreading disease would depend on how quickly it was contained - "I advise everybody not to jump to premature conclusions. There is still a great deal of uncertainty. We operate with scenarios, not yet with projections, ask me in 10 days". She added that, if the disease is "contained rapidly, there can be a sharp drop and a very rapid rebound", in what is known as the V-shape. Chinese equities are closing higher today as buyers propel markets. The Shanghai Composite is up 1.9% and the Hang Seng is higher by 0.7%. But the Japanese 225 has closed down by 0.69% after Japanese GDP data missed its -1.0% forecast to come in at -1.6% from a previous reading of 0.4%. Revised Industrial Production also took a hit at 1.2% against a forecast and previous reading of 1.3%. This data suggests that the Japanese economy is under strain and has prompted a move against the trend in other Asian equities this morning. Moves in FX have been small but the AUD is once again out performing. Gold is trading at 1581.60 while Oil is trading around flat for the session. Liquidity conditions may be lower today due to the US holiday and this may slow any major moves in markets.

Eurogroup meeting are set to take place today. The German Bundesbank will release its monthly report today. The US is closed to mark the President’s Day holiday.

EURUSD

The EURUSD pair continues to weaken after breaking down from a rising bearish wedge which was retested as resistance earlier this month. The price is now trading at the 1.0830 level after breaking 1.0900 and 1.0880. The loss of the support of the low from October at 1.0880 has led to a continued selloff in the pair. Support has been found at 1.0827 on Friday and this may be used again today. Further support may arise at 1.0800 and 1.7600. The 1.0700 level may be used if the selloff breaks the 1.0750 area.

Price action may wish to test resistance at 1.0880 followed by 1.0900. The previous aupport at 1.0984 is found within the area of the 1.1000 level which has turned to resistance. From there the former supporting levels at 1.1017 and 1.1060 may be used ahead of a test on 1.1100 and the trend line. A breakout higher may result in price action engaging the previous highs at 1.1178 and breaking above 1.1200. A break of that round number level may see price move higher to retest the 1.1240 level. Beyond this the 1.1282 level may be used as resistance followed by 1.1300 and then the 1.1346 area. The highs around 1.1400/1.1450 have been used to prevent further test into higher levels.

German 30 Index

The German 30 Index has broken through the 13600.00 all time high, and is now trading at 13775.00 after hitting 13800.00 overnight. The index is consolidating in this area as it attempts to move higher and gain ground from the breakout. A break higher may target the 13860.00 level, with a view to testing the 13900.00 level. The potential for a test of the 14000.00 round number remains strong if buyers can remain in control and keep the index above 13600.00. Buyers may target the 14300.00 area as potential resistance beyond the round number.

Price action has found short term support around 13711.00/13700.00. The 13640.00 level may also provide support but a loss of this area may open the way for a retest on the 13600.00/13577.00 area followed by the 13500.00 support level. A breakdown from this area may engage the supporting lows at and below 13000.00 which are now critical support from December and loss of this support may open the way to test the low at 12792.00 followed by the 12600.00/12660.00 area. The 12500.00 area was used as resistance in September and a break back under this level opens the way to 12180.00 and 12000.00 followed by the October low at 11820.00.

Phillip Konchar