Last week (22-28 March 2020) was quite tough on the USD. The dollar index lost by 364.9 PIPs or rather 3.56%. A technical look shows that the US dollar was losing against all major and minor currencies last week.

On Monday the 23rd, the Federal Reserve bank of the USA decided to buy all risky assets in the US market beginning with mortgage-backed securities to ensure that the credit markets survive this corona pandemic.

On Friday the 27th March, the USA passed a US$2.2 trillion virus relief bill, the largest rescue package in history. This brought a strong inflationary pressure on the USD while giving the stock markets a much-needed boost.

The SnP500, Dow Jones and Nasdaq indices recorded their strongest weekly rise in more than 20 years

The response from the US government was similar to Asian countries.

The Reserve Bank of Australia injected $6.9 billion and promised to buy $4billion worth of bonds.

The RBA has already pumped more than $65 billion cash in March 2020, bought $9 billion government bonds, and is planning a QE infinity to shield credit markets from coronavirus pandemic.

Is this the bottom in the equities markets across the world?

As of March 29, the USA had confirmed 136,880 people with corona virus.

This is spread in all the 50 states with New York being the greatest victim totalling 59,513 infected people.

The USA has eclipsed all other nations in the world.

The American policy has been to maintain social distancing, clean hands, working at home except for essential staff, and limited travel.

However, based on infection rate data, this seems not to be working. Some states are working to implement more stringent measures to the partial lockdowns.

With millions of people locked down in homes, more and more companies may continue to experience losses, lowered production, lowered sales, and hence the economy.

Until the rates of infection start to reduce and the lockdowns start being eased, investors expect further strains on most US stocks.

1. There is a speech later today (30th March) by President Trump. His planned response in stopping COVID-19 will be very important to investment decisions for the week

2. Chinese Manufacturing PMI will be crucial to understand how rapidly they are getting back to work.

3. Caixin Manufacturing PMI in China will also be a key factor showing how fast China is producing.

4. US non-farm payrolls will be crucial in determining how much the USA is affected.

5. The US ISM-Manufacturing PMI will be key data in visualizing the effect of Corona on US manufacturing

6. In Europe, there will be unemployment data in the Eurozone

The Coronavirus outbreak has not only given financial markets their biggest test not just in the last 10 years since the financial crisis, but the biggest global crisis since World War Two.

We can't underestimate the impact that the recent events will have on a day to day life going forward, and if we're going to see that much impact on our day to day life the impact on financial markets and global economies will be magnified tenfold.

Not since 1987 have we seen falls on US stock markets as we saw in the last seven days.

For seven consecutive sessions, we saw the Dow Jones move by over 1000 points, while central banks around the world tried to paper over the cracks with the largest stimulus packages we've ever seen.

The Bank of England for example, has cut interest rates to the lowest level for 350 years while adding stimulus of £200 billion. Global central banks have looked to prop up their economies to the tune of over one trillion dollars.

Of course, in financial markets volatility breeds opportunity, and the movements although erratic, give retail and institutional traders opportunities to trade.

So, for an industry that thrives on market volatility the recent movements are giving our clients opportunities to trade and profit.

The key thing around a time like this is making sure that we can educate our clients, and protect them against the huge moves that we're seeing.

Education is a massive thing at Scope Markets, so throughout all of our regions during this time of high volatility, we have looked to add continuous educational webinars, videos and written content in order to teach our clients the basics of not just trading, but of risk management.

It's impossible to predict what the future holds for the markets, in fact it's impossible to predict what will happen in the next trading session.

The outbreak will continue to be one of the biggest issues the global economy has ever faced. However, with continued protection from central banks and governments it feels like once the dust is settled businesses will be given every opportunity to fight back

For financial markets we must remember that markets are cyclical, stock markets in the US have been rallying ever since Donald Trump came to power and were of course due to a correction.

Nobody could envisage how big that correction would be but then that's the mystery of the markets.

The markets will recover and at one point we will return to the levels that we saw prior to this crisis, but the big question will be how long will it take to get there and what will be the financial cost of a market recovery.

Global markets have surged higher over the past 24 hours amidst an improvement in global investment sentiment which in turn benefited global markets and has seen the US dollar drift slightly lower.

The sentiment was boosted by news that the US president Donald trump's administration had struck a deal with Senate Democrats and Republicans on a fiscal rescue package that would make available more than $2 trillion in spending and tax breaks, aimed at softening the impact of the Coronavirus outbreak on the US economy.

The plan will see $50 billion made available for loans and other aid to businesses, the delivery of $1,200 To most citizens and households, and more than $350 billion for small businesses to maintain their payrolls.

Unemployment insurance will also be boosted while tax payments will be deferred.

Markets rebounded sharply on Tuesday after the news that there was a deal in principle, seeing stock markets on Wall Street fly higher with the Dow Jones up over 2000 points.

What will be key for currencies, and especially the US dollar will be weather markets can hold onto these gains or weather, yet again we see that whipsaw effect which sees markets fall sharply yet again.

The Coronavirus outbreak has of course been dominating markets at the start of the week, but with economic data due for release in the next couple of days we could see the likes of initial jobless claims, and GDP readings be closely watched.

The GDP reading is a lagging indicator, so will show data for Q4, a time when markets and the economy were not dominated by this virus outbreak.

However, the initial jobless claims are expected to show a stark warning of the economic picture on Thursday when they are expected to show the highest level ever of 1 million claims up from 281K, the largest gain ever on the figure.

European markets were very much dominated by the same stories over the last couple of days, which of course are the coronavirus and the US economic plan to battle the coronavirus.

The talk of a $2 trillion bailout package for the US economy helped to lift markets across the board.

The package in the US follows on from what we've seen by the ECB in Europe, and what we've seen from the German Chancellor Angela Merkel as she called for a stimulus package in Germany at the start of the week.

This is the first time we've seen real optimism in financial markets since the crisis began, and this has instigated sweeping gains across the board, not just on stock markets but on currency markets as well.

The euro has been under severe pressure since the start of this

crisis, but we have seen some green shoots of recovery for the euro over the last couple of days, and some steady gains.

Data over the next couple of days will show that business confidence for March is obviously severely under pressure.

The reading is likely to point to the fact that businesses are quite rightly worried about what the future holds. The Ifo business climate reading is expected to come in at 87.7.

There was some slightly better news out of Italy regarding the death rate from coronavirus, as the rate slowed for the second consecutive night.

However Italy still remains in dire need, and death numbers are still the highest in Europe and the world.

It's been an incredible week for the UK and for the Pound, as the UK went into full lockdown on Monday evening, meaning that nothing but travel for groceries and medical emergencies was permitted.

Those who are unable to work at home and key workers we're allowed to travel but we're very much advised not to.

However, there has been criticism of the UK government’s handling of the Coronavirus outbreak, as it is stated that mixed messages are leading to too many people still on the streets and not following the advice.

The Chancellor of the exchequer Rishi Sunak has already announced wide-reaching measures worth over £500 billion to combat and protect individuals and businesses, and it's expected that he will announce more in the coming days to protect the self-employed.

The pound has been one of the worst-hit currencies globally, as at its worst point last week it traded at its worst level for 35 years against the US dollar, and against the Euro.

The announcement of the US agreement between the Republicans and Democrats in the Senate has helped to push all currencies higher as well as stock markets.

There is economic data due for release on Wednesday, Thursday and Friday from the UK, however, a lot of economic data is used as an indicator to predict further economic performance, which it's very hard to do that in the current climate.

Data such as Wednesday's inflation and retail sales numbers are likely to show an inflated picture, as the period it covers does not include that affected by the coronavirus.

The Bank of England will hold its interest rate-setting meeting on Thursday, but due to the fact that rates have already been slashed to 0.1%, it's unlikely that we will see further cuts.

What we will want to hear though from Andrew Bailey, is what extra measures, if any the bank is going to take to help combat the virus and its effects.

The slight recovery in WTI oil prices has helped the Canadian dollar over the last couple of days. Oil prices jumped from $22 a barrel to $25 a barrel, but only as a result of market swings.

The Canadian dollar is closely correlated to the oil price, and without any action currently taken the price has struggled to recover due to the lack of demand.

However, lockdown around the world means that they will undoubtedly see supply disruption, the issue is we don't know how bad that would be yet.

The Bank of Canada finally acted to try and protect the economy finalising a new program to support the liquidity and efficiency of government funding markets.

The new plan called the provincial money market program (PMMP) is an asset purchase facility that will acquire provincial issued money market securities through the primary issuance market.

What the Bank of Canada has basically announced is a form of quantitative easing, but many worry that the BOC had not gone far enough.

The bank has said they will continue to closely monitor global and domestic market developments; however, the Canadian bank is still one of only a handful to not cut interest rates. It is expected that the only steps the BOC can now take is a full-blown quantitative easing and a potential rate cut to help stimulate the economy.

As western economies enter stricter lockdown phases to counter the spread of the coronavirus, news that China will lift travel bans in Hubei province from Wednesday serves as a rare piece of good news for markets.

China was first to shut down owing to the spread of the virus and now appears to be the first country emerging out of the crisis.

This is a constructive development for those currencies that are most exposed to the performance of the Chinese economy particularly the Australian dollar.

Of course, it's not just the performance of the Chinese economy that helps to lead the Aussie higher, the fact that we saw positive news out of the US yesterday in terms of their bailout package has also boosted the currency.

The easing of restrictions by Chinese authorities comes after Hubei province reported new infections dropped to zero on March 19th suggesting the spread of the disease had all but been contained.

Authorities have added they will lift restrictions on citizens in the town of Wuhan, which was the epicentre of the global virus pandemic, from April 8th.

China is Australia’s main trading partner, and the falling economic activity owing to the lockdown was immediately reflected in valuations of the Australian dollar.

As a result, the Aussie is now 16% down against the US dollar for 2020 and down 12% against the euro and 4% against the Pound.

Very much like their performance of the Australian dollar the Kiwi has seen positive moves over the start of this week as an agreement on an enormous US bad out plan gathered pace and seemed to get the agreement in the Senate from both Democrats and Republicans.

There was also good news out of China as restrictions in Hubei province we're set to be lifted as there were no new cases of coronavirus reported since the 19th March.

China is one of New Zealand's largest trading partners, and the lockdown has hit the economy in New Zealand hard.

Joyner initiated a strict lockdown in Wuhan in Hubei province on January 23rd, thereby restricting the movements of 60,000,000 people and setting the Chinese economy on the path to a sharp economic slow down that translated into significant falls for the New Zealand dollar.

The Kiwi dollar and global markets have responded positively to the news that the current virus is losing its grip over China, with Asian markets trading into the green for most of the start of this week.

The Federal Reserve bank of the US cut rates on Tuesday the 3rd of March in an emergency move to mitigate the effect of Corona virus on the US Dollar.

The current challenge in the USA economy is the loss in equities markets by more than $3.6 trillion in one week. This loss was triggered by Apple company when they announced a profit warning last month (Feb).

More and more companies in the USA are feeling the effect of the coronavirus pandemic.

Besides the popular belief that China is a big manufacturing hub for the world, it is also a big market for many American companies. T

he coronavirus pandemic has stalled most manufacturing operations in China. It has also affected the transport/movement of finished products as well as raw materials.

January Caixin Manufacturing PMI data showed a strong slow down in Chinese manufacturing activity mainly due to coronavirus and due to the Chinese New Year.

It is highly expected that the February Caixin manufacturing PMI will be much lower. This implies that the Chinese will suffer a higher unemployment rate, a low production rate and a low purchasing power.

The attempts by the Fed on Tuesday 3rd February to cut rates and shield the equities markets as well as the USD from coronavirus losses may or may not work. In this article, we examine the possible scenarios.

US equities markets have been on the strongest bull run of all time. Technical indicators were screaming overbought for the past two months. This means that the growth in 2020 may not have been real. That is, not backed by real fundamental growth of the companies.

It was widely accepted that the markets may enter a correction phase where prices drop to harmonize with the fundamentals. As the markets trended higher and higher, investors increased their portfolio in safe haven assets such as gold to shield themselves against the risks posed by the overbought bull markets.

When the coronavirus started spreading rapidly and breaking records set by prior epidemics such as SARS and MERS, the first markets that got affected was oil markets.

A month later, the corona epidemic had penetrated the Profit & Loss books of the US companies. This gave the traders a reason to start shorting equities.

The equities markets experienced the biggest weekly drop since 2008. On the proceeding dip, bold investors started buying the dip and the markets have recovered a considerable percentage to date.

It has been normal to buy dips in the past but this particular dip is different.

The interest rate cuts in the USA may boost the USA dollar, but may not boost manufacturing in China nor increase the Chinese purchasing power.

Other economies are largely expected to lower interest rates in a similar reaction to the coronavirus pandemic.

While rate cuts may not control the spread of the virus, when scientists finally find a way to control the virus, the cuts will support an economic rebound and restore confidence in the equities markets.

The big question is when.

Based on previous pandemics, there is a chance the coronavirus may continue spreading and stalling the equities markets for an extended period.

This could be 1 year or more.

In this light, there is a likelihood that the markets could extend the correction phase until the end of 2020. Supply chains are still broken since the Chinese aren’t producing.

In the next few weeks, there will be empty shelves in global stores.

Making money cheaper around the world economies will not solve the supply chains issue. Supply chains are also rapidly being affected in South Korea, Italy and Japan.

It seems unorthodox, but in the current global economic situation, MOMO and short squeeze traders are busy shorting the rallies.

Technically, the US Stocks are overbought, and investors seem not worried about it.

A recent interview by Craig Johnson, technical market strategist for Piper Jaffray, indicated that markets may remain overbought for an extended period.

However, there are concerns that the 2020 gains in the US stock markets may be as a result of “fear of missing out” FOMO.

When markets are on a bull run, they tend to create a positive feedback loop where smart money, momo crowd (momentum money) and short squeeze money all make profits from an already overbought market.

This may lead to irrational buying at high prices even when the value curve remains lower than the price. This scenario is described as FOMO.

For instance, a technical look at the SnP500 index shows a market trading at all-time highs and well over the upper trendline.

The same scenario is evident on the Dow Jones 30 index.

Whenever prices are trending without the supporting fundamental factors, markets tend to be riskier, highly irrational and may present a good trading opportunity as the prices finally harmonize with the fundamentals.

This could be triggered by a fundamental shift in the markets or by a simple price correction.

For instance, Apple (NASDAQ: AAPL) issued a warning that they may miss the 2020 Quarter 1 profit targets mainly due to coronavirus disruption of its Asian markets. However, the stock has been on a bull run since the beginning of 2019 with over 100% gains. For those who bought on the June 2019 correction, they have achieved over 90% gain to date.

Due to FOMO, the strong bull markets in the US have attracted a lot of participants in the global financial markets ranging from smart money to MOMO money and short-term short squeeze traders.

This has helped stimulate demand over the past 2 months. In addition to this, President Trump has been supporting the bullish run via trade wars, fiscal policy and political goodwill.

The recent deal between USA and China saw the Chinese government commit to tariff exemptions on 700 US companies trading in the agricultural, medical and energy sectors. This can be termed as a huge win for US stocks.

In addition to this, the trade-war has seen over $360 billion of Chinese goods take heavy tariffs thereby prompting Americans to buy American alternatives due to lower prices. This could be the fundamental driver of the extended bull markets.

First, it is prudent to acknowledge that President Trump is keen on boosting his popularity over the next few months as we approach US elections later in the year.

This means that he may strongly support the bullish run of the US stock markets. This includes attempts to keep jobs at all-time best.

Economists in the US are increasingly supporting the sentiment that the FED may lower rates and engage the stimulus wheel to keep the markets high.

This means that any negative news presents an opportunity for a buy just like in the Apple example above.

However, concerns should be set on technical trendlines to alert when markets may begin correcting.

This means that long positions in the US stocks should not take big drawdowns.

If markets fail to form new highs, it may be a signal that the Corona Virus pandemic has finally struck the US markets.

As of today (18th February 2020), US stock prices indicate that they haven’t felt the effect of the Corona Virus compared to Oil and Gold prices.

Ever since the election of Boris Johnson as Prime Minister of the UK, GBPUSD has embarked on a bullish run.

This run was halted by a triangle consolidation zone from November last year to date.

The key central price for the 3 months has been 1.30000.

On 21st January 2020, the UK Job data was released where the outcome was better than expected.

The average earning index + Bonus was better than expected while the index without bonus remained as projected.

The UK created 208k new jobs in December compared to 24k in November 2019.

This was better than the expected 110k.

The number of people filing for unemployment remained as 14.9k for December, same as November last year while the unemployment rate remained at an all-time low of 3.8%.

This key data may have several implications to the trading outlook of the GBPUSD over the next few weeks.

On this article, we examine each.

Ever since the election of Boris Johnson as Prime Minister of the UK, GBPUSD has embarked on a bullish run.

This run was halted by a triangle consolidation zone from November last year to date.

The key central price for the 3 months has been 1.30000.

On 21st January 2020, the UK Job data was released where the outcome was better than expected.

The average earning index + Bonus was better than expected while the index without bonus remained as projected.

The UK created 208k new jobs in December compared to 24k in November 2019. This was better than the expected 110k.

The number of people filing for unemployment remained as 14.9k for December, same as November last year while the unemployment rate remained at an all-time low of 3.8%.

This key data may have several implications to the trading outlook of the GBPUSD over the next few weeks. On this article, we examine each.

The 5-month bullish run of the GBPUSD may be extended further.

Based on the jobs data, the recent triangle in the pair may prove to be a pullback eyeing a bounce towards November 2019 highs or 1.35.

The current triangle seems to have a pivot point around 1.30 price level.

If the bullish sentiment continues, we expect a good trading opportunity for the break-out towards 1.35 price level.

A shorter outlook indicates that the Cable has been trading in a bearish channel ever since the new year (2020).

Today’s job data is testing the upper trendline on the 4-hour chart. Additionally, the 4-hour chart shows some weakness in the bearish trend where the previous 2 lows were equal.

If the price breaks outside the upper trendline, a short-term target would be last week’s high of 1.31186 with further resistance expected at 1.32 and 1.33 consecutively.

BOE’s Monetary policy committee is meeting next week on 30th January 2020.

Two members voted to cut rates last month and the number is expected to grow following recent sentiments.

However, the better than expected job data on Tuesday 21st Jan 2020 may push the members to lower the momentum on a possible rate cut and start considering a hike.

On Tuesday 21st January 2020, the Lords amended Boris Johnson’s Brexit deal back to MPs with several amendments.

Boris Johnson said that the bill will be favourable for the UK.

However, he mentioned that some sectors will be affected negatively. The automotive industry was listed among the worst hit by Brexit.

President Trump threatened to impose tariffs on the European Union if they don’t strike a deal soon that is favourable to the USA.

He specifically targeted European autos. This ripples on UK autos as they are set to benefit from such sanctions.

The tariffs are already being rolled out with EU taking the hit of $7.5b for giving unfair subsidies to Airbus.

Economic growth in the UK is expected to slow down to 1%, the weakest rate outside a recession.

These fears are influenced mainly by Brexit, European Sanctions from Trump and the rising rate of public borrowing.

Coronaviruses are a group that causes diseases in mammals and birds.

Wuhan coronavirus is a specific virus that has recently infected humans in China and is rapidly spreading to other countries in the world.

This virus causes pneumonia in humans and since it is viral pneumonia, the usual antibiotics are useless against it. Victims suffer from fever, cough and breathing difficulties.

The incubation period is about 2-5 days. This means that it can take you 2-5 days before symptoms show up. By then, you could have infected people without their own knowledge.

Human to human transmission is confirmed to be mainly through droplets when an infected person coughs or sneezes.

In some cases, it can spread through contact with a contaminated surface such as a door handle.

The number of people filing for unemployment remained as 14.9k for December, same as November last year while the unemployment rate remained at an all-time low of 3.8%

Headlines across major news sites regarding coronavirus for the past two weeks have raised mixed reactions across the world.

BBC says the situation could affect consumer confidence and cause consumers to adjust their spending trends.

There is also mild panic from around the world as new cases continue to rise in various countries.

This may result in a business slowdown, travelling slowdown, and reduced altered consumer habits.

The fact that the Chinese government jails journalists and controls information tightly has left the world short on information needed to evaluate risks associated with the virus.

This has already seen investors dump Asian, European and American stocks and buying safe havens instead.

The virus has mainly affected the Wuhan city of China. Business and travel have rapidly slowed down in the city and this is projected to affect the national stats for the country.

Due to safety concerns, the Chinese government postponed the Chinese New Year holiday celebrations to Feb 2 with Suzhou city extending to Feb 8.

This has affected demand, consumer spending and consumer confidence.

With governments raising travel alerts, travel advisories, banning travels to/from China, and Chinese New Year travels largely being affected by the situation in Wuhan, there is expected a slowdown in demand for oil and oil-based products.

This has led to a selloff in global oil markets.

Stock markets have also been affected especially the stocks for companies whose sales performance depends on China.

Over the past 2 days, Japanese and European stocks fell 2% while the SnP500 index fell 1.6%.

As already experienced with recent global negative news, the selloffs are temporary in bull markets and present a good buying opportunity.

However, the entries are dependent on the successful containment of the virus.

As the situation stands, it is best to hold more of safe-haven assets such as Gold, Yen and Bitcoin. This reduces the risk of one’s portfolio while increasing the potential for growth.

American stock markets were trading at all-time highs last week which was basically a highly overbought level.

The global fears may have lowered the price of their stocks, but they have not been fundamentally affected yet. This means there is still room for more growth if the virus is contained in time.

However, if the worst comes to worst and the virus spreads more, and (worst case scenario) affects the Chinese economy for an extended period, bear markets be triggered by this.

Australia has a ‘fire season’ where wildfires burn bushes every year resulting from lighting, spark or even deliberate lighting by humans.

However, the current bushfire started way back in September 2019 and have continued to ravage the beautiful country to date (9th January 2020).

The fires this season came early, are a lot bigger and have destroyed a substantial amount of human lives, animals, plants and property.

This has begun affecting companies as well as the economy.

Some of the worst-hit companies are in the insurance sector such as IAG insurance company.

The company (IAG) has dropped its share value from a high of $8.2 in September 2019 to the current $7.6 as at

Thursday 9th January 9, 2020, 11:41 am GMT+3 Nairobi. In response to this, they have lowered their fire insurance coverage and raised fire insurance premiums for new contracts.

Dairy giant Bega Cheese (ASX: BGA) has also been affected by the fires. The milk suppliers have suffered from the fire. Some have had to relocate while others lost pasture.

Kangaroo Island Plantation Timber Plantation (ASX: KPT) has also lost significant stock from the fires in its plantations.

ASX (Australian Stock Market) is still holding 2019 gains with the AUS200 index trading at an all-time high of $6890.

This implies that the effect of the fire has already been priced in and that a majority of the Australian companies are still booming.

A view of the economy shows a possible dip in earnings from the Australian Tourism sector.

This is in response to the images of front-page images of major news sites from around the world showing Australia on fire.

Australians fear it may scare away their annual tourists. It is also expected that this month’s consumer confidence report may be affected negatively by the bushfires.

Above is the daily chart for the AUDUSD currency pair.

The pair has been on a strong bearish trend for two consecutive years (2019 & 2020).

However, the channel running from August 2019 to date indicates that there is a good attempt to pick up a bullish trend.

This coincides with the RBA’s plan to cut rates on the first quarter of 2020.

The RBA meets next month on 4th and is likely to lower interest rates to 0.25% in a bid to boost growth in the economy.

Australian interbank futures estimate the probability of a rate cut by 25 basis points at 65%.

In addition to this, there is speculation that RBA may invoke a massive QE program to boost the ailing sectors of the economy.

This may push the Australian Dollar down further before the rate cut and QE takes full effect in the market.

Key data to watch:

1. RBA Interest rate decision

2. Chinese Caixin Manufacturing PMI

3. Australian Trade Balance

4. Australian Retail Sales

5. Australian Building Permits

6. Westpac Consumer Confidence

7. Australian Employment Data

The pair has been bearish for the last 5 days and may continue towards the lower trendline at around 0.68.

If there is sufficient support, the channel may hold and bounce towards the recent high of 0.703. If RBA continues as projected, we could head towards 2019 lows of 0.67.