Markets are generally directionless in Asian session today. Strong rebound in China PMIs somewhat fails to lift sentiments. As the origin of the coronavirus pandemic, China could be the first country to come out of it. Yet, one month of data is insufficient to confirm recovery, as the world is still under severe health and lockdown impacts. Trading in the currency markets is also subdued. Australian and New Zealand are currently the stronger ones, followed by the greenback. Sterling is the weaker one, followed by Yen. But the picture could easily change.

Technically, Dollar remains in recovery move but there is no clear follow through buying to confirm bottoming. Here are the levels to watch, 1.0953 support in EUR/USD, 1.2133 support in GBP/USD, 0.5870 support in AUD/USD, 0.9655 resistance in USD/CHF, 109.70 resistance in USD/JPY and 1.4275 resistance in USD/CAD. In addition, 1558 support in gold is needed to be taken out firmly to confirm a comeback of Dollar.

In Asia, currently, Nikkei is down -1.03%. Hong Kong HSI is up 1.09%. China Shanghai SSE is up 0.42%. Singapore Strait Times is up 2.03%. Japan 10-year JGB yield is up 0.0311 at 0.026. Overnight, DOW rose 3.19%. S&P 500 rose 3.35%. NASDAQ rose 3.62%. 10-year yield dropped -0.079 to 0.670.

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Trump: Coronavirus guidelines may toughen up a little bit

US continues to top the coronavirus cases chart with over 160k confirmed cases now (3165 deaths). President Donald Trump said that there were more than 1 million Americans tested, which is a milestone. He indicated that there were discussion in the White House regarding a national stay-at-home order. However, It’s “pretty unlikely, I would think, at this time”, as some parts of the country are “frankly not in trouble at all”. “The guidelines will be very much as they are, maybe even toughened up a little bit,” he also indicated.

Separately, Trade Representative Robert Lighthizer told G20 trade ministers that “over-dependence on other countries as a source of cheap medical products and supplies has created a strategic vulnerability to our economy”. “For the United States, we are encouraging diversification of supply chains and seeking to promote more manufacturing at home.”

New Zealand ANZ business confidence dropped to -63.5, severe recession is guaranteed

New Zealand ANZ Business Confidence tumbled to -63.5 in March, down from -19.4, close to a record low. All sectors are in deep negative: Agriculture (-79.4), Construction (-67.6), Services (-66.5), Retail (-65.4), Manufacturing (-46.2). Activity Outlook also dropped from 12.0 to -26.7: Retail (-40.7), Services (-26.8), Agriculture (-26.5), Construction (-23.7), Manufacturing (-21.0).

ANZ said: “Times are grim. We’ve never seen such a broad economic shock strike with such ferocity. Firms are right to be alarmed. Both fiscal and policy are leaping into action but a severe recession is guaranteed… It’s going to get worse before it gets better, and firms know that. Rock-bottom confidence is the symptom, not the cause, of the woes in the New Zealand (and global) economy.”

Japan: No state of emergency, no Tokyo lockdown, just don’t travel

Japan’s coronavirus outbreak remains relatively contained so far, but number of cases would likely break 2,000 handle this week. Economy Minister Yasutoshi Nishimura, insisted that there is no need to declare a state of emergency for now. He also warned of the “huge” impact on the economy with a lockdown of major cities like Tokyo and Osaka.

On the other hand, Foreign Minister Toshimitsu Motegi urged Japanese not to travel to 73 countries and regions, around a third of the world. “Level 3” travel warnings were issued against the US, Canada, China, South Korea, UK as well as many countries in Europe. Also, he indicated that the government will likely ban entry of non-Japanese nationals from the newly added countries, as with others.

A batch of February economic data was released today, but the pre-pandemic data carry little significance for now. Industrial production rose 0.4% mom, down from January’s 1.0% mom. Retail sales jumped 1.7% yoy, versus January’s -0.4% yoy. Unemployment rate was steady at 2.4%. Jobs-to-applicants ratio dropped slightly from 1.49 to 1.45.

China PMIs back in expansion, but observations needed to confirm return to normal

China’s official NBS PMI Manufacturing rose to 52.0 in March, up from 35.7. NBS PMI Non-Manufacturing also rebounded to 52.3, up from 29.6. Both PMIs are back in expansion region. “As of March 25, the resumption rate of large and medium-sized enterprises was 96.6 per cent, an increase of 17.7 per cent from the survey results on February 25,” an NBS statement said. “We cannot say China’s economy has fully returned to normal levels based on a single month. We need to continue observing changes in the following months.”

World Bank: China’s growth could be just 0.1% as EAP suffers significant economic pain

In a report released today, the World Bank projected 2020 growth in developing East Asia and Pacific to slow to just 2.1% in the base line scenario, and -0.5% in the lower case scenario. That’s a sharp deterioration from 5.8% growth in 2019. For China, growth could be at 2.3% in the baseline and 0.1% in the lower case scenario, down from 2019’s 6.1%.

The report said the region is witnessing an “unusual combination of disruptive and mutually reinforcing events.” “Significant economic pain seems unavoidable in all countries.” “Containment of the pandemic would allow for a sustained recovery in the region, although risks to the outlook from financial market stress would remain high.”

Looking ahead

UK will release Q4 GDP final and current account in European session. Swiss will release retail sales. Germany will release import price index and unemployment. Eurozone will release CPI flash. Later in the day, Canada GDP, RMPI and IPPI, US house price, Chicago PMI will be featured. But major focus would be Conference Board consumer confidence.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.4055; (P) 1.4119; (R1) 1.4238; More….

USD/CAD recovers after hitting 1.3920, but stays below 1.4275 minor resistance. Intraday bias is turned neutral first. Corrective fall from 1.4667 might extend lower. But downside should be contained by 61.8% retracement of 1.3202 to 1.4667 at 1.3762 to bring rebound. On the upside, above 1.4275 minor resistance will turn bias back to the upside for retesting 1.4667 first.

In the bigger picture, rise from 1.2061 is likely resuming whole up trend from 0.9056 (2007 low). Decisive break of 1.4689 will confirm this bullish case. Next medium term target is 161.8% projection of 1.2061 to 1.3664 from 1.2951 at 1.5545. Rejection by 1.4689 will bring some consolidations first. But outlook will remain bullish as long as 1.3664 resistance turned support holds, even in case of deep pull back.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:01 GBP GfK Consumer Confidence Mar -9 -15 -7
23:50 JPY Industrial Production M/M Feb P 0.40% 0.10% 1.00%
23:50 JPY Retail Trade Y/Y Feb 1.70% -1.20% -0.40%
23:30 JPY Unemployment Rate Feb 2.40% 2.40% 2.40%
0:00 NZD ANZ Business Confidence Mar -63.5 -19.4
0:30 AUD Private Sector Credit M/M Feb 0.40% 0.20% 0.30% 0.40%
1:00 CNY NBS Manufacturing PMI Mar 52 45 35.7
1:00 CNY NBS Non-Manufacturing PMI Mar 52.3 37.8 29.6
5:00 JPY Housing Starts Y/Y Feb -14.70% -10.10%
6:00 EUR Germany Import Price Index M/M Feb -0.30% -0.40%
6:00 GBP GDP Q/Q Q4 0% 0%
6:00 GBP Current Account (GBP) Q4 -7.0B -15.9B
6:30 CHF Real Retail Sales Y/Y Feb -0.70% -0.10%
6:45 EUR France Consumer Spending M/M Feb -0.70% -1.10%
7:55 EUR Germany Unemployment Change Mar 28K -10K
7:55 EUR Germany Unemployment Rate Mar 5.10% 5.00%
9:00 EUR Eurozone CPI Y/Y Mar P 0.80% 1.20%
9:00 EUR Eurozone CPI Core Y/Y Mar P 1.10% 1.20%
12:30 CAD GDP M/M Jan 0.20% 0.30%
12:30 CAD Raw Material Price Index Feb -0.80% -2.20%
12:30 CAD Industrial Product Price M/M Feb 0.10% -0.30%
13:00 USD S&P/CS Composite-20 HPI Y/Y Jan 3.20% 2.90%
13:45 USD Chicago PMI Mar 40 49
14:00 USD Consumer Confidence Mar 115.1 130.7

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