After falling over 2300 points yesterday for its worst trading session since the Black Monday crash in 1987, DOW Futures are now indicating a positive opening of around 600 points when the markets open later this morning. This move has occurred after earlier overnight, futures had the markets opening much lower. Looking at the DOW on a technical basis, there is a strong possibility of the DOW bouncing off a long-term support level. Traders also reacted to the suspension of all major sports leagues as well as the cancellation of the NCAA men’s basketball tournament. New York City was placed in a state of emergency and all Broadway shows were canceled as there can be no gatherings of more than 500 people. Many school districts, universities, and colleges have closed and gone to online instruction. The FED announced a huge liquidity injection yesterday of $1.5 trillion. Analysts expect more measures to be announced at the FOMC meeting on March 18, and currently, Fed Fund futures are pricing a 94.5% expectation that the FED will cut rates 100 bps to 0.00-0.25%. As the markets attempt to rebound, the USD is stronger this morning against all major currencies. US Treasury yields are also higher this morning, with the 10-year note trading at .9506%, while the 30-year bond was trading at 1.8416%.
EUR/USD is trading off of overnight lows after the European Central Bank's actions failed to impress traders. Without any major economic releases due today from the Eurozone, the single currency will be at the mercy of trader sentiment as the Coronavirus continues to spread through the continent. The CDC is now calling Europe the Epicenter of the virus. Italy’s cases rose to 15.113, with deaths now at 1,016, while Spain added almost 870 cases to 3.146, with France and Germany adding cases as well. EUR/USD is still not in an oversold basis, so a further move lower is possible during trading today.
GBP/USD is attempting to rebound after yesterday’s sell-off. Traders are waiting for the release of Bank of England minutes, after the unscheduled rate cut. As the virus continues to move through Europe, volatility is expected to occur during today’s trading. Yesterday’s move in GBP was a confirmation of a technical near-term bearish break and that leaves GBP vulnerable to further selling. A reversal in the DOW today could weigh on the pound.
After the FED announced its funding moves, the Bank of Japan added 500 billion JPY in the system through unscheduled repo operations and announced the buying of JPY 200 billion Japanese Government Bonds., in an attempt to stabilize the market. Technically the USD/JPY has tested weekly highs as some traders moved out of safe-haven trades that had been added earlier this week. This occurred after the sudden turnaround in the US equity markets overnight.
USD/CAD is trading off overnight highs after it was announced that the wife of Prime Minister Justin Trudeau had tested positive for the Coronavirus. PM Trudeau is in self-isolation at the moment. There have been over 100 cases reported in Canada, with one fatality. As oil prices continue to fall, the Canadian Dollar continues to tumble as well. Brent crude was down $0.67, trading at $32.55 a barrel. The fall in Brent crude is expected to be the largest weekly decline since Jan. 18, 1991, the beginning of the first Gulf War. US Texas Intermediate crude was also lower, trading at $30.84. WTI is expected to fall 25% this week, the largest drop since Dec. 19, 2008.
As the number of cases and deaths increase around the world. China, where the virus originated, reported only 8 new cases and 7 new deaths. The total number of cases in China now sits at 80.813, with 3.176 deaths. Asian stock markets were mostly lower, following the action of the DOW on Thursday, as concerns over the virus continue to weigh on investor sentiment. Continued lack of confidence in government action to have the right plan to contain the virus has traders concerned.