Asian markets are set to open in positive territory on Wed, following a mild gain in the US market overnight. Despite coronavirus concerns, investors tend to believe that central banks and policymakers have measures to stimulate the economy during and post the public health crisis. The dollar fell from its recent high alongside with the US treasuries as demand for safety receded.
Federal Reserve chairman Powell said the central bank is ‘monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy’ in his testimony speech last night.
NZD/USD is moving higher this morning, following RBNZ’s decision to keep interest rate unchanged in a meeting. This outcome is largely in line with market expectation, which forecasts only 5.2% likelihood of a cut today. NZD/USD jumped over 0.75% to 0.646 in minutes following RBNZ’s rate decision, rebounding sharply from its 3-month low.
The outlook, however, remains uncertain amid concerns that the coronavirus headwind could undermine New Zealand’s export, tourism and transportation sector. Similar to the Aussie dollar, Kiwi is adversely hurt by lower commodity prices and weaker economic outlook - the coronavirus crisis being likely to drag down China’s demand and growth prospects. Although the number of newly emerged disease cases has fallen in the past week, it might take weeks or even months for the economy to resume to normal operation.
Technically, NZD/USD is in a bearish trend with both 10-Day SMA and SuperTrend (10,2) sloped downwards. The immediate support level can be found at 0.641 (61.8% Fibonacci Retracement) and the 0.633 (76.4%) area.
Index wise, the S&P 500 index climbed 0.17% overnight, reaching a fresh high. Real Estate (+1.22%), energy (+1.04%), consumer discretionary (+0.77%) and healthcare (0.62%) were among the leading sectors, whereas communication (-0.61%), consumer staples (-0.36%) and information technology (+0.34%) lagged behind.
Crude oil prices rebounded overnight from a 13-month low, but the rebound is mild and could be temporary as China’s energy demand is likely to remain soft in the near term. OPEC+ and Russia will need to come out with a cohesive output cut plan to shore up oil prices.
Technically, Brent oil is oversold and thus a technical rebound is likely. Immediate support level can be found at the US$ 54.1 area (161.8% Fibonacci Extension), and a major support can be found at the US$ 51.2 area (200% Fibonacci Extension).
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Margaret Yang Yan