Stocks slide as a new wave of coronavirus cause shockwaves
Global stocks declined today as investors remained cautious about a second wave of the coronavirus in China. This is after the country confirmed about 100 new cases of the disease during the weekend. The new cluster was identified in the southern side of Beijing. In response, China announced that it will place a mandatory lockdown in parts of Beijing and initiate mass testing. In addition to China, the number of coronavirus cases in several countries, including the US and South Africa increases the likelihood that the economic slowdown will be worse than initially expected. In Europe, the DAX index and the FTSE 100 declined by more than 1% while in the US, futures tied to the Dow Jones are down by more than 500 points.
The Swiss franc rose slightly against the US dollar as investors rushed to safe havens. The currency also rose even after the statistics office released weak economic data. The numbers showed that factory gate prices declined by 0.5% in May after declining by 1.3% in the previous month. The prices fell by 4.5% on an annualized basis. Meanwhile, traders are focusing on the Swiss National Bank (SNB) interest rate decision on Thursday. Analysts expect that the bank will leave interest rates unchanged and possibly announce a new stimulus package. There are some who believe that the bank will push interest rates lower as it tries to devalue the franc.
The Australian dollar declined slightly against the US dollar, mostly because of fears of a second wave of the virus. It also declined because of the relatively weak numbers that were released by China earlier today. The data showed that industrial production increased by 4.4% in May after increasing by 3.9% in the previous month. In the same month, fixed asset investment declined by 6.3% after falling by 10.3% in April. Retail sales fell by 2.8% in May while the unemployment rate improved to 5.9%.
The EUR/USD pair is trading at 1.1259, which is slightly higher than Friday’s low of 1.1210. On the four-hour chart, the pair is forming a bearish flag pattern, which is usually a signal that the price may resume the downward trend. This is further evidenced by the falling relative strength index and the 14-day and 25-day EMAs that have made a bearish crossover. Therefore, if the price declines, there is a possibility it will test the important support at 1.1150.
Gold’s role as a safe haven was questioned today as its price declined below key support. On the four-hour chart, the XAU/USD pair is trading at 1711.68, which is below the important 100-day and 50-day exponential moving averages. The pair has also formed a three black crows pattern, which is an important bearish pattern. Therefore, the price may continue falling as bears attempt to move below 1700.
The USD/CHF pair declined to an intraday low of 0.9490. On the four-hour chart, the price is slightly above the 38.2% Fibonacci retracement level. It is also slightly above the 50-day and 100-day exponential moving averages. This decline, coming a day after the pair rose by more than 2%, means that it could continue falling ahead of the SNB decision. If it does, the pair may test the important support at 0.9050.