Sea of red as COVID-19 spreads in Europe and Asia
Global stocks and crude oil tanked while safe-havens rose as coronavirus cases surged in Iran, Italy, and South Korea. In Europe, the Stoxx index declined by 3%, which is the biggest sell-off since December 2018. In Germany, the Dax index fell by 3.3% while in the UK, the FTSE fell by almost 3%. The same was the trend in Asia, where South Korea’s Kospi declined by more than 3.9%. In the US, futures tied to the Dow and S&P500 declined by almost three percent. Meanwhile, the price of oil dropped by more than 3.5% while gold rose by more than 2.3%. In Italy, the number of infections rose to more than 152. Nonetheless, there is a ray of hope in China, where the number of daily infections is falling. Also, the number of people who have recovered is increasing.
The Swiss franc continued to rise against the euro, in a trend that is troubling the Swiss National Bank (SNB). The SNB has always preferred a weaker franc because it helps to boost exports. The currency is at its highest level against the euro in more than four years. The central bank is between a rock and hard place. The status quo could remain, risking the economy. Alternatively, it could intervene to curtail the risk and anger the US. Even if it was to intervene, it has very limited options because interest rates are at historic lows. Also, its recent options of buying foreign currencies and selling the franc has not stemmed the rise. In the meantime, the franc has weakened by more than 1% against the USD. Just last month, the US treasury added Switzerland to its watchlist of potential currency manipulators.
The euro declined today by almost 30 basis points. This happened as traders rushed to the USD, which is often seen as a safe-haven currency. The dollar index, which measures the USD against a basket of currencies rose by almost 40 basis points. In Europe, we received positive survey data from the Ifo Institute. Business expectation rose to 93.4 in February from the previous 92.9. The current assessment of 98.9 was better than the expected 98.6 while the business climate index rose from 96.0 to 96.1.
The EUR/CHF pair declined to an intraday low of 1.0607. This was the lowest level in more than 4 years. The pair has been declining since April last year, when it reached a high of 1.1475. The price is below the 28 and 56-day EMA. It is also along the lower line of the Bollinger Bands. The signal and main line of the Relative Vigor Index (RVI) are below the centreline. The price may continue moving lower.
The XBR/USD pair dropped by almost 4% as traders continued to worry about global risks. The pair dropped to an intraday low of 55.63, which is along the 61.8% Fibonacci Retracement level. It is also the lowest level it has been since February 13. The price is below the 14-day and 28-day exponential moving averages. The RSI, which has been declining, reached an intraday low of 20. The pair may continue declining as risks and demand challenges rise.
The EUR/USD pair declined to an intraday low of 1.0800. The price is along the 14-day and 28-day EMA on the hourly chart. The RSI is neutral at the current level of 50. The signal line of the MACD indicator has also declined. The pair may remain at the current level during the American session.