Tiomarkets Daily Market Commentary 24 Jan 2020

https://www.tradingview.com/x/63JWF7K7/

The end of the week is upon us, a week dominated by events in China and the spread of the Coronavirus. However, Thursday’s late day statement from the WHO seems to have calmed traders' nerves - for now. As the Chinese New Year celebrations get under way, Asian stock markets make some minor gains in what was a particularly quiet session. However Europe would see far more robust gains with the DAX up over 200 points by the time Wall Street opens. For FX the major currencies were all stuck in tight ranges ahead of the US open. The only exception was GBP which did its best impression of a roller-coaster after better than expected PMI data. Initially the Pound would rally to 1.3174 but would drop back below 1.3100 before Europe ended their day.
The US session started off in a similarly quiet manner with the DJ opening up 100 points and FX happy to drift in tight ranges. But then the US CDC announces a second confirmed case of the coronavirus and is also monitoring a further 63 possible cases. USDJPY drops from 109.60 to 109.35 and XAU rallies from 1562 to 1574 in a matter of minutes. AUD would retest weekly lows at 0.6827. US stocks soon give up all their opening gains as negative sentiment takes over the markets. By the time Europe goes home the DJ is down almost 200 points, XAU is up to 1575 and JPY crosses are getting hit hard. EURJPY has dropped to a low of 120.42 from an overnight high of 121.26. The afternoon sessions sees further risk aversion as the DJ drops over 200 points. In percentage terms the S&P and Nasdaq suffer even more, both down almost 1% by the close. USDJPY’s break of support at 109.70 is now well and truly confirmed as we touch a low of 109.18. And EURUSD’s break of 1.1065-70 support also looks clean as we touch 1.1020. AUD’s post employment data gains are long forgotten as we hit a low of 0.6818. The calming effect of Thursday’s WHO statement is also a distant memory, as we end the week with traders and pretty much the whole world wondering how this will play out.
A week ago, we were looking at a topside break in EURJPY as we traded through 122.50-65 resistance and attempted to push higher as events in the Middle East de-escalated quickly. Friday sees us at the other end of the recent ranges with the double bottom at 120.17 under threat. Below there we have support at 120, but as you can see from the hourly chart, it gets pretty grim thereafter. Obviously headlines about the coronavirus will be the driver of the next moves, so worth keeping an eye on into the new week.