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Market mood sours after Apple's profit warning

18 February 2020

Risk aversion swept through Asian markets on Tuesday morning after Apple warned investors it may not meet revenue targets for this quarter due to the coronavirus outbreak hitting production and demand in China.

This stark warning has quelled investor optimism over monetary policy easing from China and other major central banks, shielding the global economy from the detrimental impact of the virus outbreak. Asian shares are poised to close on a negative note amid the risk-off mood, with caution likely to hit European shares later this morning. With coronavirus fears back on the table, this could be a rough day for global stocks as investors offload riskier assets in favour of safe-haven assets like the Dollar and Gold.

More pain in store for the Euro?

The Euro wallowed near 3-year lows on Tuesday as concerns over weakening growth in the region and fears around the coronavirus impact on the Eurozone economy haunted investor attraction towards the currency.

Appetite for the Euro could deteriorate further if a German business sentiment indicator paints a gloomy picture of the eurozone’s biggest economy. The ZEW Indicator of Economic Sentiment released today will be one of the first indicators showing the potential hit to the European economy from the virus, and is projected to slip to 22.0 in February from 25.6 seen in January. A report that prints below market expectations may weaken the Euro, which has already shed over 2.3% against the Dollar this month.

Focusing on the technical picture, EURUSD is heavily bearish on the daily charts with prices trading around 1.0835 as of writing. Sustained weakness below 1.0879 should encourage a further decline towards the 1.0800 support level. A breakdown below this point could open doors to levels not seen since mid-April 2017 at 1.0730.

Time for Gold to shine towards $1600?

Gold entered Tuesday’s trading session with a slight spring in its step after Apple’s sales warning rekindled fears around the coronavirus outbreak and the negative impacts it may have on the global economy.

The precious metal has gained over 4.5% year-to-date, and could push higher this quarter amid renewed global growth concerns and speculation around looser monetary policy. Focusing on the technical picture, Gold has the potential for further upside this week if $1579 proves to be reliable support. An intraday breakout above $1589 may trigger a move towards $1600. Alternatively, a breakdown below $1579 could encourage a move back towards $1555.



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