Market Sentiment Diving on China Virus Worries

Market sentiment analysis:

  • Trader confidence has been damaged by the spread of the deadly coronavirus and the markets show few signs yet of rallying after Monday’s slump.
  • Safe havens, particularly US Treasuries, are benefiting while the Australian Dollar and other “risk on” currencies are falling hard.

Trader confidence suffers viral damage

Traders are continuing to favor safe havens such as US Treasuries and sell “risk on” currencies such as the Australian Dollar, the Canadian Dollar and the New Zealand Dollar as concern grows that the spread of the coronavirus could damage the Chinese, and potentially the global, economy.

As the chart below shows, the Aussie – which is seen as a proxy for China – has been hit particularly hard and while there has been an anemic bounce in some risk-off assets such as stocks it could be short-lived.

Australian Dollar Price Chart, One-Hour Timeframe (January 16 – 28, 2020)

Chart by IG (You can click on it for a larger image)

AUD/USD
BEARISH

Data provided by



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 11% 6% 9%
Weekly 16% -12% 6%

Elsewhere, commodities such as crude oil, copper and iron ore are falling in price on worries about a potential economic slowdown that could be caused by the virus.

In this webinar, I looked at the trends in the major currency, commodity and stock markets, at the forward-looking data on the economic calendar this week, at the IG Client Sentiment page on the DailyFX website, and at the IG Client Sentiment reports that accompany it. You might also like to check out the DailyFX Trading Global Markets Decoded podcasts.

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— Written by Martin Essex, Analyst and Editor

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