A double whammy

Our go-to risk pair is the AUDJPY and right now the pressure is on for more AUDJPY downside. The close connection of Australia’s economy with China, making up around 30% of Australia’s GDP, means that the pair is being hit twice. Firstly, the AUD is weak due to its close connection with China and secondly, the AUD is weak due to a slowing of the global economy. The JPY is strong on the risk-off flows which typically see JPY strength.

So, there is most likely going to be a scary session ahead as fear starts to grip the markets. The contagious nature of the coronavirus is self-evident given how widely the virus has already spread. It will soon get to a stage where the virus can’t be easily tracked. So, how far these markets can fall is not yet known, but they almost certainly will take more falls today after a heavy night of losses across the Asia-Pac indices: Nikkei -3.67%, Hang Seng -2.63%, Shanghai Comp -3.71%.

Any retracements in the AUDJPY pair should find sellers, and traders could scale into shorts.

Gold longs from yesterday were not behaving as they should with the strong risk-off market, but we saw some selling in gold and silver, so we pulled our gold longs.