Natural Gas Price Fundamental Daily Forecast – May Be Overcooked; Don’t Get Caught Shorting Weakness

Natural gas futures hit a multi-year low on Friday, strongly suggesting the winter heating season is over and traders are ready to move on to the spring. Besides the weather, traders are also blaming the steep losses this week on coronavirus fears.

Another catalyst behind Friday’s rout is the loss of 22.3 gas-weighted heating degree days (gHDD) from the American model over the past 24 hours, according to forecaster DTN, which adjusted its latest forecast to warmer ahead of Friday’s opening.

At 14:39 GMT, April Natural Gas is trading $1.722, down $0.30 or -1.71%. The low of the session so far is $1.642.

U.S. Energy Information Administration Weekly Storage report

On Thursday, the EIA reported that domestic supplies of natural gas fell by 143 for the week-ending February 21. Total stocks now stand at 2,200 trillion cubic feet, up 637 billion cubic feet from a year ago, and 179 billion cubic feet above the five-year average, the government said.

Going into the report, traders were looking for a larger-than-average withdrawal for the week-ending February 21.

A Bloomberg survey predicted withdrawals ranging from 145 Bcf to 165 Bcf, with a median of 156 Bcf. Polls by the Wall Street Journal and Reuters produced similar results, while NGI’s model projected a pull of 152 Bcf.

The EIA recorded a 167 Bcf draw for the similar week last year, while the five-year average withdrawal stands at 122 Bcf.

Daily Forecast

Now that the market has hit its multi-year low at $1.642 and winter has been officially put to bed (aside from a few pockets of cold weather than tend to pop up in March) speculators can kick back and relax. What this means is that a few of the major short-sellers are likely to start booking profits so there exists the possibility of a meaningful short-covering rally over the near-term.

Start watching for signs of a bottom like a lower-low, higher-close, commonly known as a closing price reversal bottom. Turning higher on a move over yesterday’s close at $1.752 can produce such a move.

Don’t get complacent if short. This market can turn higher in a hurry if the short-sellers start to take profits. The next rally may have nothing to do with the weather.

Price of Gold Fundamental Daily Forecast – Watch for Buyers as Market Enters Value Area

Gold prices are down over 1% on Friday as investors continued to book profits after a recent run-up in prices. The market has now give back more than half of its gains from the rally that began on February 5. Nonetheless, the precious metal is set to finish with a third consecutive monthly gain although it is likely to end the week with a loss.

At 13:25 GMT, April Comex gold is trading $1623.80, down $18.70 or -1.14%.

The weakness in gold this week has come as a surprise to some. One would think that with the global equity markets plunging over 10% in just a matter of days, gold prices would’ve soared. But that hasn’t been the case.

Gold is probably under pressure this week for a number of reasons. Firstly, it may be too costly or overpriced. Secondly, traders may have fully priced in the sooner-than-expected rate cuts from the Fed. Thirdly, some of the bigger hedge funds may be booking profits to offset some of their losses or to meet margin calls in other markets. Finally, investors may have determined that buying U.S. Treasurys for safe-haven protection is a better play due to liquidity issues in gold.

Daily Forecast

We said earlier in the week that the longer-term fundamentals for gold are bullish and that investors may not buying again when the market hits a value zone. Not everyone has the money to chase a market higher.

Gold is currently trading inside a value zone defined as $1628.10 to $1604.80. Watch the price action and read the order flow on a test of this zone to determine if buying is taking place. Ideally, we’d like to see a closing price reversal bottom, but that moves seems unlikely today unless there is a dramatic turnaround.

Gold may have to spend a few days inside the value zone, building a support base, before prices move higher.

Oil Price Fundamental Daily Forecast – Prices May Be Too Cheap for Buyers to Ignore

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures hit multi-year lows on Friday and were set for their steepest weekly decline in more than four years as the spread of the coronavirus raised fears of a global recession and consequently lower demand for crude oil and other refined fuels.

At 12:54 GMT, April WTI crude oil is at $45.73, down $1.36 or -2.95% and April Brent crude oil is at $51.04, down $1.14 or -2.18%.

Benchmark Brent crude, which fell about 2% on Thursday, has lost around 13% this week, putting it on track for its steepest decline since January 2016. The front-month April contract expires later on Friday.

“Brent crude under $50 a barrel will be a nightmare scenario for OPEC and may well provoke a … response of some kind from the core grouping,” said Jeffrey Halley, a senior market analyst at brokerage OANDA.

Still Hope of Rebound in Demand

Some market participants are expecting the recent sell-offs to be reined in as soon as the demand fears wane. Furthermore, with coronavirus cases in China beginning to slow, the country may soon return to full production, while the spread of the virus runs its course throughout the rest of the world.

“We have to believe that the COVID-19 virus will be contained sooner rather than later. I’m optimistic we should see some positive news by mid-next week at the latest,” said Sukrit Vijayakar, director of energy consultancy Trifecta.

“Subsequently, the sudden drop in demand will rise back just as suddenly, to at least 75% to 90% of prior levels. The rise back will be spurred by current low prices.”

Daily Forecast

The markets are getting pretty close to levels that will become attractive to speculators, but there has to be a catalyst to get the markets moving higher. China’s PMI data over the week-end are expected to come in weak, but that news may already be priced into the market.

News from China started the selling, and news from China is likely to ignite the rally. If you believe the data, the virus may be subsiding in China and the country may start to go back to work. Once investors know the duration of the virus then they’ll be better able to figure out when the outbreak is likely to end in the rest of the world. This will then encourage more buying in crude oil along with extremely cheap prices.

EUR/USD Mid-Session Technical Analysis for February 28, 2020

The Euro is trading lower shortly after the U.S. opening on Friday after the single currency hit its highest level since February 4 earlier in the session. The rally this week has been fueled by speculation of a sooner-than-anticipated rate cut by the U.S. Federal Reserve in the wake of the rout in U.S. equity markets and increasing fears of a global recession.

At 12:34 GMT, the EUR/USD is trading 1.0996, down 0.0004 or -0.03%.

The EUR/USD rally began to fizzle and the Forex pair turned lower after a key market gauge of long-term Euro Zone inflation expectations fell to a record low on Friday as concerns about the spread of coronavirus intensified.

The five-year forward fell to 1.1182%, its lowest level ever. It measures expected Euro Zone inflation over a five-year period, Reuters reported.

Daily EUR/USD

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. The main trend will change to up on a trade through the last main top at 1.1095. The main trend changes to down on a move through the last swing bottom at 1.0778.

The first main range is 1.1239 to 1.0778. Its retracement zone is 1.1007 to 1.1062. Today’s rally stopped inside this zone at 1.1053.

The new short-term range is 1.0778 to 1.1053. Its retracement zone at 1.0916 to 1.0883 is the next potential downside target.

Daily Technical Forecast

Based on the early price action and the current price at 1.0996, the direction of the EUR/USD the rest of the session on Friday is likely to be determined by trader reaction to the main 50% level at 1.1007.

Bearish Scenario

A sustained move under 1.1007 will indicate the presence of sellers. The next downside target is a downtrending Gann angle at 1.0995. This is a potential trigger point for an acceleration to the downside.

If 1.0995 fails as support then look for a potential break over the near-term into the short-term retracement zone at 1.0916 to 1.0883.

Bullish Scenario

A sustained move over 1.1007 will signal the presence of buyers. The first upside target is a downtrending Gann angle at 1.1029. Overcoming this angle will indicate the buying is getting stronger with potential upside targets coming in at 1.1053 and 1.1062.

Taking out 1.1062 could trigger a surge into a resistance cluster at 1.1095 – 1.1096.

Global Shares Routed as Investors Ditch Risky Assets on Fear of Worldwide Recession

The major European stock indexes are trading sharply lower on Friday after entering correction territory the previous session, after falling 10% below the record highs seen on February 19. This follows steep sell-offs in seven major Asia-Pacific markets and the United States, which have also reached correction territory.

It took just six days for the benchmark S&P 500 and NASDAQ Composite Indexes to fall from record highs into correction territory. On Thursday, the blue chip Dow Jones Industrial Average plunged 1,200 points, its biggest one-day drop ever.

In Europe, at 11:44 GMT, the UK’s FTSE 100 Index is trading 6602.33, down 194.07 or -2.86%. Germany’s DAX Index is at 11974.17, down 393.29 or -3.18% and France’s CAC is trading 5354.27, down 141.33 or -2.57%.

Global Stocks Set for Worst Week Since 2008 Financial Crisis

World share markets were headed for their worst week since the depths of the 2008 financial crisis as investors ditched risky assets on fears the coronavirus would become a pandemic and trigger a global recession, Reuters said.

Hope that Fed Comes to the Rescue

Hopes that that the epidemic that started in China would be over in a few months and economic activity would return to normal have been shattered, as new infections reported around the world now surpass those in China.

Hope remains, however, that the U.S. Federal Reserve would cut interest rates as soon as next month to support economic growth.

“We don’t even need to wait for economic data to wee how badly the economy is being hit. You can tell that the sales of airlines and hotels are already falling by a half or something like that,” said Tomoaki Shishido, senior economist at Nomura Securities.

“It is fair to say the impact of the coronavirus will be clearly much bigger than the U.S.-China trade war. So the Fed does not have a reason to take a wait-and-see stance next month,” Shishido said.

Expectations the Fed will cut interest rates to cushion the blow are rising in money markets. Analysts say Fed funds futures are now pricing in about a 75% chance of a 25-basis point cut at the central bank’s March 17-18 meeting.

Fear of Major Global Economic Slump

Fear of a major economic slump is driving commodity and equity prices lower.

Fear as measured by the CBOE volatility index or VIX, jumped to 39.16, the highest level in about two years, well out of the 11-20 range of recent months, according to Reuters.

The index, which measures expected swings in U.S. shares in the next 30 days, typically shoots up to around 50 when bear market selling hits is heaviest and approached almost 90 during the 2008-09 financial crisis, Reuters wrote.

“The coronavirus now looks like a pandemic. Markets can cope even if there is a big risk as long as we can see the end of the tunnel,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “But at the moment, no one can tell how long this will last and how severe it will get.”

Major Asia-Pacific Markets Tumble into Correction Territory; Investors Brace for Chinese PMI Reports

Asia-Pacific shares tumbled on Friday with China’s Shenzhen stocks diving nearly 5%, as investors feared the coronavirus might develop into a pandemic and trigger global recession. Investors continued to brace for an impact on economic growth with global shares heading for the worst week since the financial crisis in 2008.

On Friday, Japan’s Nikkei 225 Index settled at 21142.96, down 805.27 or -3.67%. Hong Kong’s Hang Seng Index closed at 26129.93, down 648.69 or -2.42% and South Korea’s KOSPI Index finished at 1987.01, down 67.88 or -3.30.

In China, the Shanghai Index settled at 2880.30, down 111.03 or -3.71% and in Australia, the S&P/ASX 200 Index closed at 6441.20, down 216.70 or -3.25%.

Coronavirus Update

New infections rapidly spread around the world with countries stockpiling medical supplies and preparing emergency responses, shattering hopes that the epidemic would be contained to China and economic activity would return to normal, Reuters said.

China to Release Key Economic Data This Weekend

While the markets are closed over the weekend, China will release reports on February Manufacturing and Non-Manufacturing PMI. The data is expected to show activity in in China’s manufacturing sector in February probably shrank at the fastest pace since the global financial crisis, a Reuters poll showed, as the epidemic took an excruciating economic toll on Chinese factories. Analysts estimate Manufacturing PMI at 45.1, down from 50.0 and Non-Manufacturing PMI at 51.4, down from 54.1.

Steep Losses in China after Stimulus Effect Wears Off

The global stock market rout knocked mainland Chinese shares lower, which have been relatively well supported this month, as new coronavirus cases in the country fell and Beijing doled out measures to shore up economic growth.

The CSI300 Index of Shanghai and Shenzhen shares dropped 2.9%, on track for its first weekly loss in three.

“Economic troubles outside China, especially in the U.S., could hurt the Chinese economy. Foreign investors, who were buying Chinese shares after the Lunar New Year holidays, have become a net seller since late last week,” said Wang Shenshen, senior equity strategist at Mizuho Securities. “Their selling might have intensified today.”

Crude Oil Price Update – Major Buyer Could Be Lurking Between $45.92 and $43.55

U.S. West Texas Intermediate crude oil futures finished sharply lower on Thursday and in a position to challenge its December 24, 2018 main bottom at $45.92. The market is also poised to move lower for sixth straight session on Friday, while remaining on track to close the week more than 12% lower. This would mark its biggest weekly decline in more than four years.

On Thursday, April WTI crude oil settled at $47.09, down $1.64 or -3.37%.

Daily April WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $45.88 will reaffirm the downtrend.

The nearest resistance is the main top at $54.66. A trade through this price level will change the main trend to up. This is highly unlikely, however.

Today’s session begins with the market down six sessions from its last main top at $54.66. Typically, we start to look for potentially bullish closing price reversal bottom between 7 and 10 days from the last main top. So start looking for bottoming action next Monday through Thursday.

Short-Term Outlook

Lower tops and lower bottoms are the definition of a downtrend. Lower highs and lower lows define a downswing. Taking out Thursday’s low at $45.88 will confirm the current downswing. If this move is able to generate enough downside momentum then look for the selling to possibly extend into the January 20, 2016 main bottom at $43.55.

Although we typically look for closing price reversal bottoms in 7 to 10 days from a top, due to the huge loss in price on the current downswing, we’re not going to ignore a closing price reversal bottom on the sixth day down. So pay attention to yesterday’s close at $47.09. It’s going to begin Friday’s session as resistance, but overcoming this level on an intraday basis could spook some of the weaker short-sellers into covering their positions. This move would be an early indication of a short-term bottom.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Nearing Major Retracement Zone at 2876.75 – 2753.75

March E-mini S&P 500 Index futures finished sharply lower on Thursday after taking out a number of swing bottoms. The sell-off was primarily fueled by a combination of profit-taking and protective sell stops being executed. Given the downside momentum, I’m sure some of the selling was driven by computer algorithms. For those who keep track of these sort of things, the index is down over 10% from its last major top, which puts it in correction territory.

On Thursday, March E-mini S&P 500 Index futures settled at 2957.00, down 153.25 or -5.18%.

Daily March E-mini S&P 500 Index

Daily Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a move through 3397.50. This is highly unlikely, however.

The market is also down six days from its most recent top at 3397.50. Usually we start looking for closing price reversal bottoms after seven sessions especially when a market is testing a major 50% to 6.18% retracement zone. So we’re going to wait until Monday before we start fishing for a bottom especially with China expected to release its Manufacturing and Non-Manufacturing PMI reports at 01:00 GMT on Saturday. This report could make or break this market on Monday.

The main range is the contract low at 2356.00 from December 24, 2018 and the contract high at 3397.50 from February 20. Its retracement zone is 2876.75 to 2753.75. Trader reaction to this zone should determine the direction of the March E-mini S&P 500 Index into the close on Friday.

Daily March E-mini S&P 500 Index

Early Forecast

We’re seeing some relatively light selling pressure early Friday. If this is able to generate enough downside momentum then look for the selling to extend into the main 50% level at 2876.75. We could see a technical bounce on the first test of this level.

If 2876.75 fails as support then look for the selling to possibly extend into the series of main bottoms at 2855.00, 2818.75 and 2787.00. These are followed by the main Fibonacci level at 2753.75 and another main bottom at 2741.75. Watch for buying at these levels also.

The Fib level at 2753.75 is also the trigger point for a potential acceleration to the downside.

We’re going to learn a lot about how investors feel about this market by how they react to 2876.75 to 2753.75. I know it’s a day early, but I wouldn’t be surprised by a major reversal to the upside following a test of this value zone. It there is no reversal then we could see an attempt to build a support base.

We’re not issuing a buy signal. We’re just saying that a test of 2876.75 to 2753.75 could bring in the bargain-hunters.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Driven Lower by Fear of the Unknown

March E-mini Dow Jones Industrial Average futures plunged in volatile trading on Thursday as fear the coronavirus may be spreading in the United States encouraged investors to aggressively trim their stock market exposure. The heavy selling is being blamed on a slew of corporate and analyst warnings on the economic impact of the virus.

At 21:35 GMT, March E-mini Dow Jones Industrial Average futures are trading 25630, down 1292 or -4.80%. Earlier in the session, the Dow hit its lowest level since August 14 at 25523.

The huge sell-off has essentially wiped out the entire U.S/China Phase One trade deal premium, which suggests traders don’t believe China will be able to fulfill its side of the agreement.

Daily March E-mini Dow Jones Industrial Average

Daily Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed on Thursday when sellers took out three more main bottoms at 26592, 25978 and 25710. The next target is the August 14 bottom at 25326, followed by the major bottom at 24859 from May 31, 2019.

The main range is 24859 to 29543. Its retracement zone at 26648 to 27201 is new resistance. Trading on the weak side of this zone is also helping to generate the downside momentum.

Daily March E-mini Dow Jones Industrial Average

Short-Term Outlook

The selling stopped near an uptrending Gann angle at 25605. If this fails then look for the selling to extend into the next main bottom at 25326, followed by another uptrending Gann angle at 25229. This is the last potential support angle before the May 2019 main bottom at 24859.

By no means are we trying to predict a bottom when we mention Gann angles and main bottoms as potential support. We’re just giving you a road map. No one can predict the momentum so for all we know, the market could straddle these levels all session before moving swiftly in either direction.

We do know from experience that these types of sell-offs often end with a dramatic reversal bottom, but that is usually triggered by a catalyst. Some think the Fed will come to the rescue. This may be a temporary solution designed to stop the selling, but any technical bounce is likely to be met with fresh shorting pressure because the Fed can’t really do anything to offset the damage from the coronavirus because the problem has not run its course and no one knows what the final outcome will look like when all is said and done.

Natural Gas Price Fundamental Daily Forecast – Prices Plunge on Huge Shift Toward Milder Temperature Trends

Natural gas futures are plunging on Thursday, shortly before the release of the U.S. Energy information Administration’s weekly storage report. The move came as a surprise to some who were banking on the return of cold weather over the short-term and firmer cash prices to provide support. The steep drop is also likely to offset a bullish EIA report because it shouldn’t really matter much to traders what happened last week.

At 15:17 GMT, April natural gas is trading $1.752, down $0.084 or -4.63%.

Natural Gas Intelligence (NGI) said early Thursday that a large milder shift in one of the major weather models overnight is responsible for sending natural gas prices tumbling on Thursday.

NGI further reported that the European model underwent “big milder trends” overnight, shedding 17 heating degree days (HDD) compared to its Wednesday afternoon run and 27 HDD versus 24 hours prior, according to NatGasWeather.

The model showed “not nearly as much cold air into the northern U.S. March 5-8 by seeing a weather system over Southern Canada only providing a minor glancing blow,” the forecaster said. Based on the warmer shift overnight, “the natural gas markets are going to view weather patterns as being warm/bearish after the current cold shot sweeping across the northern and eastern U.S. exits Saturday.

U.S. Energy Information Administration Weekly Storage report

On Thursday, the EIA reported that domestic supplies of natural gas fell by 143 for the week-ending February 21. Total stocks now stand at 2,200 trillion cubic feet, up 637 billion cubic feet from a year ago, and 179 billion cubic feet above the five-year average, the government said.

Going into the report, traders were looking for a larger-than-average withdrawal for the week-ending February 21.

A Bloomberg survey predicted withdrawals ranging from 145 Bcf to 165 Bcf, with a median of 156 Bcf. Polls by the Wall Street Journal and Reuters produced similar results, while NGI’s model projected a pull of 152 Bcf.

The EIA recorded a 167 Bcf draw for the similar week last year, while the five-year average withdrawal stands at 122 Bcf.

Daily Forecast

Traders pressed prices lower following the EIA’s weekly storage report since it came in below the estimates. Furthermore, given the bearish shift in the forecast, it would’ve taken a huge draw to trigger any kind of a short-covering rally.

EUR/USD Mid-Session Technical Analysis for February 27, 2020

The Euro spiked to the upside against the U.S. Dollar on Thursday to its highest level since February 7 after the release of disappointing U.S. economic reports. This moves comes on top of strong buying throughout the week on expectations of a sooner than expected rate cut by the U.S. Federal Reserve.

At 14:45 GMT, the EUR/USD is trading 1.0984, up 0.0105 or +0.96%.

The Commerce Department said Thursday that orders for durable goods slipped 0.2% last month after climbing 2.9% in December. Excluding volatile transportation orders, durable goods orders rose 0.9%, fastest growth since April 2018.

Economists had expected a bigger drop in overall orders for durable goods, which are items such as appliances and industrial machinery meant to last at least three years.

It doesn’t matter that the Durable Goods report beat the estimate since they came in lower than the previous read. Furthermore, investors believe the number will likely be lower in February since the coronavirus has spread to the United States.

The Preliminary GDP reading of 2.1% is also useless since it represents stale data from the fourth quarter of 2019. We are confident that U.S. GDP will take a hit in the first quarter of 2020.

Traders are pricing in rate cuts from both the Fed and the European Central Bank (ECB). Some think this is offsetting news, but it isn’t. Since U.S. rates are much higher than Euro Zone rates, a 25 basis point rate cut in the U.S. will have a much greater impact on the U.S. Dollar than a 0.10% rate cut by the ECB will have on the Euro.

Daily EUR/USD

Daily Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has shifted to the upside. The main trend will change to up on a move through the last main top at 1.1095. A trade through 1.0778 will signal a resumption of the downtrend.

The minor trend is up. It was reaffirmed earlier today when buyers took out 1.0926. This move added to the surge in momentum.

The main range is 1.1095 to 1.0778. Its retracement zone at 1.0937 to 1.0974 is currently being straddled. Trader reaction to this zone will set the tone for the rest of the session.

Daily Technical Forecast

Based on the early price action and the current price at 1.0984, the direction of the EUR/USD the rest of the session on Thursday is likely to be determined by trader reaction to the Fibonacci level at 1.0974.

Bullish Scenario

A sustained move over 1.0974 will indicate the presence of buyers. If this move generates enough upside momentum, we could see the rally extend into downtrending Gann angles at 1.1000, 1.1023 and 1.1034.

Bearish Scenario

A sustained move under 1.0974 will signal the presence of sellers. This could trigger a break into the 50% level at 1.0937. Since the main trend is down, the sellers will be trying to establish a secondary lower top.

Taking out 1.0937 will indicate the selling pressure is getting stronger. This could eventually lead to a test of the nearest uptrending support angle at 1.0878.

Price of Gold Fundamental Daily Forecast – Fed Rate Cut May Be Fully Priced In for April

Gold prices are trading higher on Thursday after a late pick-up in demand the previous session following the test of a one-week low. After a surge to its highest level in seven years on Monday, prices have drifted mostly sideways to lower. The move isn’t reflecting a change in the bullish fundamentals, but rather the thought that prices are relatively too expensive.

At 15:44 GMT, April Comex gold is trading $1651.10, up $8.00 or +0.50%.

There is no doubt that gold has been a tricky market to analyze and trade this week because it only makes sense that prices should be moving sharply higher in response to a steep plunge in U.S. equity markets and a drop in 10-year U.S. Treasury yields to a record low on Thursday. The price action suggests that gold buyers may have been well ahead of the rest of the markets when it made its recent surge while U.S. stocks were hitting record highs.

Lower Interest Rates Reduce Opportunity Cost of Holding Non-Yielding Gold

Growing expectations that central banks will certainly need to take action if coronavirus continues to spread, particularly outside China, is helping to prop up prices.

Investors have increased bets for a rate cut by the U.S. Federal Reserve to ease the impact on the economy, according to an analysis of Fed funds futures compiled by the CME Group. Money markets have also priced in cuts by the European Central Bank and Bank of England.

“Markets are already pricing in some decent cuts to rates across the globe so that’s the clear driver of (gold) prices and demand,” ANZ’s Hynes said.

Money markets are now fully pricing in one 25 basis point cut in the Fed’s rate by April and three by March 2021. Expectations for a European Central Bank (ECB) rate cut have also risen; money markets now price in more than 80% chance of a 10 basis point rate cut in July.

Central Banks Still Reluctant to Call for Rate Cuts

Not all central banks are in a hurry to cut rates, however, with U.S. officials saying it’s too early to consider a rate cut, and policymakers in Australia and New Zealand feeling a rate cut from current levels may not have the same impact on the economy as a rate cut from higher levels.

Furthermore, in a surprise move, the Bank of Korea kept its benchmark policy rate unchanged. Central bank policymakers surprised the financial markets by holding its benchmark interest rate at 1.25% when analysts polled by Reuters were expecting a rate cut. That was despite a recent spike in the number of coronavirus cases in the country threatening its economy.

Aberdeen Standard Investments’ Leong Lin Jing described the Bank of Korea’s interest rate decision as “a little bit curious.”

“Bank of Korea has had a habit of being a little bit behind the curve … when acknowledging that growth is slowing down,” Leong said.

Daily Forecast

The gold market chart pattern clearly indicates a U.S. rate cut has been priced into the market. Now traders are playing the waiting game as they wait for U.S. policymakers to come aboard. Prices could sit in a range until economic data that the Fed can’t ignore clearly shows the need for a rate cut sooner than expected.

You see the drop in Treasury yields means investors want a rate cut, the rise in gold indicates traders expect a rate cut in April, but the Fed doesn’t always give the markets what they want.

Oil Price Fundamental Daily Forecast – Traders Betting on Drop in US Gasoline Demand as Virus Spreads

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday shortly after the regular session opening. Brent crude only is trading below the major bottom put in at $52.78 on December 24, 2018. Meanwhile, U.S. crude oil is rapidly moving closer to its next downside target, the December 24, 2018 min bottom at $45.92.

At 13:07 GMT, April WTI crude oil is at $47.29, down 1.44 or -2.98% and April Brent crude oil is at $51.93, down $1.50 or -2.81%.

Coronavirus Continues to Cause Demand Worries

Oil prices are down for a fifth day on Thursday as a growing number of new coronavirus cases outside of China fuelled fears of a pandemic which could slow the global economy and lower crude demand.

On Wednesday, for the first time ever, the number of new coronavirus infections outside China, the source of the outbreak, exceeded the number of new Chinese cases.

Late Wednesday, Donald Trump tried to calm investor nerves by telling Americans that the risk from coronavirus remained “very low,” and placed Vice President Mike Pence in charge of the U.S. response to the looming global health crisis.

He also said the spread of the virus in the United States was not “inevitable” and then went on to say: “It probably will, it possibly will. It could be at a very small level, or it could be at a larger level. Whatever happens we’re totally prepared.”

Global Fuel Demand Limited

The coronavirus’ spread to large international economies including South Korea, Japan and Italy has caused concerns that fuel demand growth will be limited. On Wednesday, consultants Facts Global Energy forecast oil demand growth will only be 60,000 barrels per day in 2020, or practically “zero”, because of the widening outbreak.

Coronavirus Spread in US Fuels Fresh Round of Selling

Speculators, betting that coronavirus may spread in the United States, prompted a fresh round of selling on Wednesday that has carried over into Thursday’s session. If the outbreak continues to worsen in the U.S. then look for energy prices to continue to fall with the move led by gasoline. The United States is the world’s largest oil producer and consumer.

Gasoline stockpiles dropped by 2.7 million barrels in the week to February 21 to 256.4 million, the U.S. Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1 million barrels to 138.5 million.

U.S. crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the EIA report showed. This was less than the 2-million barrel rise analysts had expected.

Daily Forecast

The outlook for crude oil prices is bearish. If April Brent crude oil prices fall below $50.00 per barrel, expect OPEC and its allies to sit up and take notice. OPEC+ plans to meet in Vienna over March 5-6.

JPY/USD Forex Technical Analysis – Poised to Move Lower as Treasury Yields Hover Near Record Lows

The Dollar/Yen is under pressure on Thursday after the yield on the benchmark 10-year U.S. Treasury note resumed its slide and fell to a new record low as concerns over the impact of the coronavirus weakened global equity markets, sending investors into the safe-haven Japanese Yen.

The move lower in yields also reflects traders’ expectations the Federal Reserve will step in at some point and cut rates. However, many economists doubt the central bank will deliver such relief and whether it will be effective.

At 12:45 GMT, the USD/JPY is trading 109.911, down 0.504 or -0.46%.

Lower U.S. rates will tighten the spread between U.S. Government bonds and Japanese Government bonds, thereby making the U.S. Dollar a less attractive investment.

Daily USD/JPY

Daily Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier today when sellers took out Tuesday’s low at 109.892. The main trend will change to up on a move through the last swing top at 112.226.

The minor trend is also down. Minor bottoms at 109.619 and 109.534 are potential downside targets.

The main range is 108.313 to 112.226. Its retracement zone at 110.270 to 109.808 is currently being tested. Earlier in the session, buyers came in at 109.839, slightly above the lower or Fibonacci level.

The next major retracement zone target is a Fibonacci level at 109.361.

Daily Technical Forecast

Based on the early price action and the current price at 109.911, the direction of the USD/JPY the rest of the session on Thursday is likely to be determined by trader reaction to the short-term Fibonacci level at 109.808.

Bearish Scenario

A sustained move under 109.808 will indicate the presence of sellers. This could trigger a plunge into the nearest uptrending Gann angle at 109.506, followed closely by the major Fib level at 109.361.

Bullish Scenario

A sustained move over 109.808 will signal the return of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the short-term 50% level at 110.270. This is a potential trigger point for an acceleration into a resistance cluster at 110.712.

Side Notes

The USD/JPY has erased about 62% of its rally from January 31 to February 20. Unless there is a dramatic turnaround in the U.S. equity markets and Treasury yields, the USD/JPY is likely to weaken with 108.421 to 108.313 the next likely downside target.

USD/JPY Fundamental Daily Forecast – Weaker on Rising Fed Rate Cut Expectations

The Dollar/Yen is trading lower on Thursday with the weakness being fueled by safe-haven buying of the Japanese Yen. The selling is being driven primarily by overall weakness in the global equity markets and overall expectations of further shedding of risky assets related to the rapidly spreading coronavirus outbreak.

The U.S. Dollar is also losing ground to its Japanese counterpart as Treasury yields continued to hit new lows and investors bet the Federal Reserve would cut interest rates to offset the impact of the coronavirus on the U.S. economy.

Falling yields are essentially tightening the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a less-attractive investment.

At 09:38 GMT, the USD/JPY is trading 110.080, down 0.335 or -0.30%.

Dollar Weakens as Coronavirus Fallout Raises Fed Rate Cut Expectations

Money markets are now fully pricing in a 25-basis point rate cut in the Fed’s rate by April and three by March 2021.

But analysts point out that with Fed rates much higher, and therefore the range them to fall much larger, investors are dumping the dollar – reversing some of the U.S. currency’s gains over the past month.

The dollar rose sharply against the Japanese Yen recently when it’s safe haven currency credentials and investors’ belief that the U.S. economy was relatively sheltered from the coronavirus fallout encouraged buying of the greenback. Additionally, some say investors were aggressively dumping the Japanese Yen on the belief that its economy was headed toward a recession.

Moving forward, the direction of the USD/JPY, which touched a multi-month high on February 20 at 112.226, would be dependent on economic data on the coronavirus’s impact on confidence and trade outside of China.

Trump Says Coronavirus Risk in US is Low

President Donald Trump told Americans on Wednesday that the risk from coronavirus remained “very low,” and placed Vice President Mike Pence in charge of the U.S. response to the looming global health crisis.

He also said the spread of the virus in the United States was not “inevitable” and then went on to say: “It probably will, it possibly will. It could be at a very small level, or it could be at a larger level. Whatever happens we’re totally prepared.”

Daily Forecast

With U.S. equity markets poised to drop further over the near-term and Treasury yields continuing to fall, it’s hard to build a case for a rapid turnaround in investor sentiment so we expect to see the USD/JPY move lower.

We could see periodic short-covering rallies in the USD/JPY but they are likely to create fresh shorting opportunities. The downtrend is likely to continue unless the Bank of Japan provides stimulus of its own.

AUD/USD Forex Technical Analysis – Trader Reaction to Weekly Mid-Point at .6583 Sets Late Session Tone

The Australian Dollar is edging higher on Thursday in a move that could be related to profit-taking or end-of-the-month position-squaring. Nothing changed in the fundamentals overnight to warrant a rally. In fact, the news was primarily on the bearish side.

Australia’s 10-year bond yield fell to a new record low of 0.845 percent after Australia’s Prime Minister Scott Morrison said risk of global pandemic is very much upon us, while urging the need to take action.

Additionally, Australia private capital expenditure dropped -2.8% in Q4, much worse than expectation of 0.5% increase. In seasonally adjusted terms, building and structures dropped -5.9%. Mining dropped -2.7%. Equipment, plant and machinery rose 0.8%. Manufacturing dropped -10.1% and other selected industries fell -1.9%.

At 08:53 GMT, the AUD/USD is trading .6572, up 0.0027 or +0.42%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through .6543 will signal a resumption of the downtrend. The main trend will change to up on a move through .6750, which is highly unlikely at this time.

Daily AUD/USD

Daily Forecast

The AUD/USD is picking up a little strength in the European session. Most of the short-covering is likely tied to the small rebound from session lows in the U.S. stock index futures markets.

Despite the early session strength, the Aussie is still trading lower for the week and slightly below its weekly mid-point at .6583 that could prove to be resistance later today.

Upside momentum could increase over .6583, but sellers are likely to be waiting at a pair of downtrending Gann angles at .6614 and .6622. Since the main trend is down, sellers are likely to re-emerge on a test of this area.

On the downside, since nothing took place on the fundamental side that would suggest the AUD/USD has found support, we’re expecting lower prices over the near-term. Weak Chinese economic growth is likely be a drag on the Australian economy so we expect the Aussie to continue to move toward its March 3, 2009 main bottom at .6285.

However, the announcement of government stimulus measures could trigger a sharp short-covering rally at any time.

AUD/USD and NZD/USD Fundamental Daily Forecast – Weighed Down by Lower Chinese Growth Expectations

The Australian and New Zealand Dollars are trading higher on Thursday on light-profit-taking and end-of-the-month position squaring. Mixed, but mostly lower trading in Asia Pacific stock markets could also be contributing to the slight rebound from Wednesday’s steep losses.

Nonetheless, the rapid global spread of the coronavirus kept investors on edge as they continued to shed risky commodity and trade-based currencies while seeking shelter in safe-haven government bonds.

At 08:09 GMT, the AUD/USD is trading .6562, up 0.0017 or +0.26% and the NZD/USD is at .6305, up 0.0016 or +0.26%.

Aussie, Kiwi Affected by Expectations of Lower Chinese Growth

The virus has driven an enormous flight of assets out of Asia as investors try to isolate themselves from both the outbreak itself and the cost of what has now been more than a month of paralysis in the world’s second-biggest economy, Reuters said.

New Zealand’s government said on Thursday it might need to pump money into its economy, where China accounts for about a quarter of exports, should the fallout cause a global recession.

Capital Economics now expects Chinese growth to contract this year.

“The economic risks from extended disruption are non-linear,” Capital’s chief Asia economist and its senior China economist, Mark Williams and Julian Evans-Pritchard, said in a note.

“The longer it continues, the more likely it is that some firms won’t be able to pay workers, and will have to either cut pay, lay people off or shut down altogether.”

New Zealand Finance Minister Warns of ‘Short, Sharp’ Economic Hit

In a speech to the Auckland Chamber of Commerce on Thursday, New Zealand Finance Minister Grant Robertson warned that New Zealand will experience a “short, sharp” economic hit.

“We meet today in the shadow of one of the biggest uncertainties that the global economy has seen in recent times,” he told those gathered.

He warned that the virus outbreak would have a “serious impact on the New Zealand economy in the short term”.

He stressed this point numerous times during his speech, making it clear that the economy would “rebound”, the New Zealand Herald reported.

Australian 10-Year Bond Yields Hit Record Low, CapEx Drops

In other news, Australia’s 10-year bond yield fell to a new record low of 0.845 percent after Australia’s Prime Minister Scott Morrison said risk of global pandemic is very much upon us, while urging the need to take action.

Additionally, Australia private capital expenditure dropped -2.8% in Q4, much worse than expectation of 0.5% increase. In seasonally adjusted terms, building and structures dropped -5.9%. Mining dropped -2.7%. Equipment, plant and machinery rose 0.8%. Manufacturing dropped -10.1% and other selected industries fell -1.9%.

Asian Shares Mostly Lower; Bank of Korea Leaves Policy Rate Unchanged While Aussie Yields Hit Record Lows

The major Asia Pacific stock indexes traded mostly lower on Thursday as cautious investors digested the latest news over the fast-spreading new coronavirus while assessing the potential global economic impact of the virus that has so far infected more than 81,000 people and killed over 2,700.

Although most of the people infected and killed by the disease to-date are from China, the number of cases outside of the country has surged in recent weeks with countries like South Korea, Italy and Iran at the forefront.

Meanwhile, the U.S. Centers for Disease Control and Prevention on Wednesday confirmed the first potential “community spread” of the coronavirus stateside. Additionally, late Wednesday, President Donald Trump announced that Vice President Mike Pence will be in charge of the U.S. response to the deadly outbreak. Trump also said the risk of the disease to the country remained “very low.”

On Thursday, Japan’s Nikkei 225 Index settled at 21948.23, down 477.96 or -2.13%. South Korea’s KOSPI Index finished at 2054.89, down 21.88 or -1.05% and Hong Kong’s Hang Seng Index closed at 26687.89, down 8.6 or -0.03%.

China’s Shanghai Index settled at 2991.33, up 3.4 or +0.11% and Australia’s S&P/ASX 200 Index closed at 6657.90, down 50.2 or -0.75%.

Early in the session, U.S. futures markets are pointing toward a lower opening on Thursday after the benchmark S&P 500 Index wiped out $1.7 trillion in just two sessions.

Bank of Korea Keeps Policy Rate Unchanged

In an unexpected move, the Bank of Korea kept its benchmark policy rate unchanged. Central bank policymakers surprised the financial markets by holding the benchmark interest rate at 1.25% when analysts polled by Reuters were expecting a rate cut. That was despite a recent spike in the number of coronavirus cases in the country threatening its economy.

Aberdeen Standard Investments’ Leong Lin Jing described the Bank of Korea’s interest rate decision as “a little bit curious.”

“Bank of Korea has had a habit of being a little bit behind the curve … when acknowledging that growth is slowing down,” Leong said.

Australian Shares Fall for Fifth Straight Session

Increased reports of coronavirus cases around the world saw Australian shares tumble of a fifth consecutive session on Thursday, wiping out all the gains achieved earlier in the year, the Brisbane Times reported.

All sectors aside from healthcare and utilities finished in the red, led by steep declines in technology and energy shares. As was the case earlier this week, the weakness was driven by uncertainty on the human and economic toll the coronavirus may bring.

In other news, Australia’s 10-year bond yield fell to a new record low of 0.845 percent after Australia’s Prime Minister Scott Morrison said risk of global pandemic is very much upon us, while urging the need to take action.

Additionally, Australia private capital expenditure dropped -2.8% in Q4, much worse than expectation of 0.5% increase. In seasonally adjusted terms, building and structures dropped -5.9%. Mining dropped -2.7%. Equipment, plant and machinery rose 0.8%. Manufacturing dropped -10.1% and other selected industries fell -1.9%.

Trump: US Coronavirus Risk ‘Very Low’; Microsoft Warns of Windows Unit Revenue Miss

U.S. equity markets finished mixed on Wednesday with the S&P 500 Index falling for a fifth straight session, while the selling pressure was a little lighter than the two previous sessions, the price action remained volatile as investors continued to react to headlines about coronavirus and its potential impact on the U.S. economy.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 3116.39, down 11.82 or -0.36%, the blue chip Dow Jones Industrial Average finished at 26957.59, down 123.77 or -0.43% and the technology-based NASDAQ Composite closed at 8980.78, up 15.17 or +0.17%.

Trump Says Coronavirus Risk in US is Low

President Donald Trump told Americans on Wednesday that the risk from coronavirus remained “very low,” and placed Vice President Mike Pence in charge of the U.S. response to the looming global health crisis.

He also said the spread of the virus in the United States was not “inevitable” and then went on to say: “It probably will, it possibly will. It could be at a very small level, or it could be at a larger level. Whatever happens we’re totally prepared.”

U.S. Coronavirus Update

Dozens of people were being checked for the coronavirus in the New York City area on Wednesday, officials said, but Governor Andrew Cuomo said the state has had no confirmed cases so far, Reuters reported.

“This situation is not a situation that should cause undue fear,” Cuomo told a news conference, saying that 27 people in New York have tested negative for the virus.

I’m happy to say right now, we don’t have a case,” county health commissioner Lawrence Eisenstein said.

In other news, the Centers for Disease Control and Prevention confirmed an infection of the new coronavirus in California in someone who had not traveled outside the United States or been exposed to a person known to have the virus, a first for the country.

Microsoft Expects Windows Unit to Miss Revenue Outlook on Coronavirus Impact

Microsoft Inc. said on Wednesday it does not expect to meet its quarterly revenue forecast for its Windows and personal computing business as a result of the coronavirus outbreak, sending its shares down more than 1% in after-market trading.

“Although we see strong Windows demand in line with our expectations, the supply chain is returning to normal operations at a slower pace than anticipated,” the company said in a statement.

Microsoft is the second company in the trillion dollar club to withdraw outlook. Earlier this month, Apple said that it may not be able to meet its March-quarter sales forecast.

Gold Price Futures (GC) Technical Analysis – Buyers Looking for Value Between $1628.10 and $1604.80

Gold futures are trading lower on Wednesday shortly after the regular session opening. Firming Treasury yields and calls for a higher opening in the U.S. stock market are encouraging long investors to book profits.

After the steep run-up this month, investors are also being cautious about buying strength.  This suggests they will be looking for value, which they may find today inside a series of retracement levels.

At 14:30 GMT, April Comex Gold is trading $1635.90, down $14.20 or -0.87%.

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1691.70 will signal a resumption of the uptrend. The main trend will change to down if a pair of bottoms at $1564.40 and $1551.10 fail as support.

The first main range is $1564.40 to $1691.70. Its retracement zone is $1628.10 to $1613.00.

The second main range is $1551.10 to $1691.70. Its retracement zone is $1621.40 to $1604.80.

Daily April Comex Gold

Daily Technical Forecast

Based on the early price action and the current price at $1635.90, the direction of the April Comex gold futures contract the rest of the session on Wednesday is likely to be determined by trader reaction to the steep uptrending Gann angle at $1636.40.

Bearish Scenario

A sustained move under $1636.40 will indicate the presence of sellers. This could lead to a labored break into a series of potential support levels at $1628.10, $1621.40, $1613.00 and $1604.80.

A pair of uptrending Gann angles at $1607.10 and $1600.40 are also potential support levels.

Bullish Scenario

A sustained move over $1636.40 will signal the presence of buyers. This could spike the market into another uptrending Gann angle at $1663.10. Overtaking this angle could trigger an acceleration into the current top at $1691.70.

Side Notes

The fundamentals are bullish, but traders are looking for value, which they may find between $1628.10 and $1604.80.