GBP – several red flags for longs

This via SG on sterling, in summary:

There are too many sterling bulls for comfort

Vulnerable long positions. Our positioning analytics are currently raising several red flags on GBP

  1. when CFTC positioning was comparatively long in April 2018, GBP/USD subsequently sold-off; 
  2. GBP/USD trades in overbought territory according to the 1y percentile of long positions at 92%; 
  3. and dry-powder analysis shows that long traders are excessively concentrated. 

we remain bullish GBP on a longer-term view but nervous for the months ahead. GBP/USD … looks vulnerable to another move towards 1.28

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Forex – Dollar in Demand, Euro, Pound Under Pressure

© Reuters.  © Reuters.

By Peter Nurse

Investing.com – The U.S. dollar remains strong Tuesday, as heightened concerns about the spread of the deadly coronavirus in China prompt demand for currencies as safer.

At 08:00 ET (0800 GMT), the traded 0.2% higher at 109.08, having fallen as low at 108.83 overnight. The Futures, which tracks the greenback against a basket of other currencies, pushed up 0.1% to 97.81, approaching the levels last seen in early December. That follows broad gains against commodity currencies in recent days as the market has priced in the risk of a drop in Chinese demand for basic materials.

Additionally, traded at 1.1019, after briefly visiting the 1.10 neighbourhood – or fresh yearly lows – at the beginning of the week.

The positive tone around the dollar, in combination with global growth concerns amidst the spread of the Chinese virus, have kept under heavy pressure of late.

“The pair remains under pressure although off Monday’s year-to-date lows near the psychological 1.10 mark,” said analysts at FXStreet. “Dynamics around the buck are expected to remain the exclusive driver of the pair’s price action for the time being along with alternating risk appetite trends in response to developments from the Wuhan coronavirus.”

With this in mind, attention is likely to be turned to the start of the Federal Reserve’s two day rate-setting meeting Tuesday, as well as the latest data releases in the U.S..

are due at 8:30 AM ET (1330 GMT), and are expected to have risen 0.3% last month, while at 10:00 AM ET, the January consumer confidence index is expected to come in at 128 from 126.5 in December.

Sterling was also weaker early Tuesday in Europe, amid concerns that the country will not be able to reach a trade deal with the EU by the end of the post-Brexit transition period at the end of the year. and were both around 0.2% lower.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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PBOC confirms that Chinese markets to only resume trading on 3 February

Says that interbank markets will also observe the extended holiday period

For those unaware, China is observing an extended holiday until 2 February in an attempt to curb the spreading of the coronavirus infection. The central bank also reaffirms that they will offer ample levels of liquidity after the holidays via OMOs.
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Here’s a bank with a ‘chill out’ view on coronavirus

Adam posted the number of cases on Monday at 

  • Jan 27: 2,744

The update today is up 1700+ cases

  • Jan 28: 4,515

Yeah, most all of it happening in Wuhan, with some cases elsewhere in China and globally. Is it OK to relax on this? 

Barclays think so. Analysts there cite the 2003 SARS outbreak, and say if that is indicative the market is over reacting. Big market moves are due to stretched positioning and a not stellar global macro background picture.

S&P 500 shorts/put option holders probably not bothering to argue with anyone about whether its over done or not. 

On the other hand, folks who zoom out the chart to the past 10 years might well say its nothing. 

As is often the case in markets, something for everyone. 

Adam posted the number of cases on Monday at 

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Forex: Dollar Advance Kept in Check by Yen Amid Safe-Haven Rush

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By Yasin Ebrahim

Invesing.com – The dollar remained on the back foot Monday, pressured by a surprise fall in new home sales data and a bid in the yen and Swiss franc as worries intensified over the spread of the deadly coronavirus.

The , which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.12% to 97.97.

The Commerce Department said new home sales fell to a seasonally adjusted annual rate of in December, confounding expectations for a 1.5% rise to 730,000 units.

The surprise drop in new home sales did little to steady the greenback against the yen and Swiss franc following a sharp uptick in safe-haven demand on reports of more Chinese deaths from the coronavirus.

fell 0.28% to $ 109.00 and fell 0.13% to 0.968.

The weakness in the greenback comes just a day ahead of the Federal Open Market Committee’s two-day meeting, which is expected to culminate in an unchanged interest rate decision.

slipped 0.02% to $ 1.1102 as unexpectedly slipped in January, denting hopes that the weakness in the manufacturing sector had steadied.

With just a few days go until the Bank of England decision and Brexit, the remained under pressure against the greenback falling 0.21% to $ 1.308.

rose 0.28% to C$ 1.3180 as the loonie tracked oil prices lower amid ongoing fears that a continued spread of the virus could dent travel and tourism, keeping a lid on oil demand.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Switzerland’s Central Bank Is Stomaching Stronger Franc For Now

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Sight deposits at the Swiss National Bank increased only marginally last week, suggesting President Thomas Jordan and his colleagues aren’t taking much action to counter the strengthening franc.

Iran-U.S. tensions and fears about the spreading Coronavirus has lifted the haven franc this year. Earlier on Monday, it breached the 1.07 per mark to touch a fresh three-year high.

Yet total sight deposits rose just 0.22% to 587 billion francs ($ 605 billion) in the week ending Jan. 24, central bank figures show.

While there’s been no evidence of interventions recently, the threat of action remains remains alive. SNB President Thomas Jordan told Bloomberg Television last week that the pledge to sell the franc if needed remains in place alongside the central bank’s record-low interest rates.

Last week, euro-area officials expressed optimism over signs of economic stabilization, citing easing global trade tensions and a mildly expansionary fiscal policy. UBS Group AG reversed its call for an SNB rate cut in March.

“The SNB is tolerating a bit stronger franc, maybe also because the economic environment is looking a bit better,” Credit Suisse (SIX:) Group AG economist Maxime Botteron said.

Responding to a U.S. decision to add Switzerland back on its watch list for currency manipulators, Jordan said the SNB was only looking to stave off deflationary conditions with its purchases of foreign currency.

He also said the SNB had the room to further cut its deposit rate, now at -0.75%,

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Eurostoxx futures -1.3% in early European trading

The negative risk mood carries over to Europe in early trades

  • German DAX futures -1.3%
  • French CAC 40 futures -1.4%
  • UK FTSE futures -1.2%

That just reaffirms the fact that risk aversion remains the name of the game currently. US futures are also down by ~1% and that will hardly offer any comfort for risk trades as we being European trading.

USD/JPY is still keeping slightly above the 109.00 handle while AUD/USD is at session lows, just under the 0.6800 level currently.

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Yen jumps, yuan slumps on worries China struggling to contain virus

By Stanley White

TOKYO (Reuters) – The yen rose and the yuan fell in offshore trade on Monday as worries that China is struggling to contain the spread of a pneumonia-like virus sparked a bout of risk aversion.

Japan’s currency, often sought as a safe-haven in times of uncertainty, rose to the highest in almost three weeks versus the dollar, while the yuan fell to its lowest since Jan. 8.

China’s cabinet announced it will extend the Lunar New Year holidays to Feb. 2, to strengthen the prevention and control of the new coronavirus, state broadcaster CCTV reported early on Monday. The holidays had been due to end on Jan. 30.

Hong Kong has also banned the entry of visitors from China’s Hubei province, where the new coronavirus outbreak was first reported, highlighting the difficulty officials face during a peak travel season.

Health authorities around the world are racing to prevent a pandemic of the virus, which has infected more than 2,000 people in China and killed 76.

There are concerns that tourism and consumer spending could take a hit if the virus spreads further, which would discourage investors from taking on excessive risk.

“There is a lot of uncertainty about how much further the virus will spread, and this is behind the moves in currencies,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.

“I thought dollar/yen would be supported at 109, but it broke through that, so now the next target is 108.50. This risk-off mood is likely to continue for a while.”

The yen rose 0.3% to 108.91 per dollar on Monday, reaching its strongest level since Jan. 8.

Japan’s currency also jumped around 0.5% versus the Australian () and New Zealand dollars () as worries about the virus drew traders toward safe-haven currencies and away from currencies that are more sensitive to risk.

In the offshore market, the yuan fell more than 0.3% to 6.9625 against the dollar, its weakest since Jan 8.

The () against a basket of six major currencies was little changed at 97.884.

Traders said market moves could be exaggerated due to low liquidity, because financial markets in China, Hong Kong, and Australia are closed for holidays.

The virus, which emerged late last year from illegally traded wildlife at an animal market in the central Chinese city of Wuhan, has spread to other countries, including Singapore, South Korea, Canada, Japan, and the United States.

China’s Hubei province, where Wuhan is located, said on Monday that 76 people have died and 1,423 new cases of the coronavirus outbreak have been identified as of end of Sunday.

The outbreak has evoked memories of Severe Acute Respiratory Syndrome (SARS) in 2002-2003, another coronavirus which broke out in China and killed nearly 800 people in a global pandemic.

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China’s national health minister warns virus appears to be infectious during incubation and is getting stronger

“The virus’s ability to spread seems to be getting somewhat stronger”

"The virus's ability to spread seems to be getting somewhat stronger"

China’s National Health Commission Minister Ma Xiaowei today said the incubation period for the virus can range from one to 14 days, and the virus is infectious during incubation, which was not the case with Severe Acute Respiratory Syndrome.

“According to recent clinical information, the virus’s ability to spread seems to be getting somewhat stronger,” Ma told a media briefing.

He warned that containment efforts will be intensified.

China has now announced that going forward there will be daily briefings at 9 am Beijing time. That’s 0100 GMT or 8 pm in New York.

The WHO repeated on Sunday that it has not yet declared the virus to be a global emergency.

Separately, researchers are debating on what to name the coronavirus. While it’s being simply labeled as ‘coronavirus’ colloquially, that’s a scientific term that’s used for a type of virus. The interim name is novel coronavirus (2019-nCoV) in scientific communities. Many are pushing to name it Wuhan coronavirus but the WHO discourages including place names so they might call it SARS-2. Colloquially, I don’t think that name will work and I suspect that something like the ‘Wuhan flu’ will win out in the general public.

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A city 1000km from Wuhan just declared a full lockdown

Shantou, a city of 5.5m on the southern coast will go on lockdown

Shantou, a city of 5.5m on the southern coast will go on lockdown

The city of Shantou on the southern coast of China in Guangdong province has announced it will be the first outside of Hubei province to go on lockdown.

That means no individual, vehicle or boat will be allowed to entering the city beginning on January 27. What’s different here is that Hubei cities are preventing people from leaving; in Shantou, they’re baring them from entering.

The choice of this city is extremely concerning. There are only 2 confirmed cases there and many are speculating this is a sign that the entire country is about to be put on lockdown. While that would be economically devastating in the short-term, it would be China’s best chance of halting the spread of the virus.

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