Turnaround Tuesday or merely a dead cat bounce?
US futures are now up by over 3% on the day while oil prices are keeping gains above 7%, with WTI crude trading around $33.40 for now. Meanwhile, Treasury yields have also recovered well after hitting record lows yesterday as we see 10-year yields around 0.67%:
In turn, this is putting pressure on the yen and franc to start the day with USD/JPY rising close to the 105.00 level from a low of 102.00 earlier today.
Meanwhile, the dollar is leading the charge amid the recovery in yields with the greenback posting solid gains against the likes of the euro, pound, aussie and kiwi as well.
Coronavirus fears are still reverberating across the globe and I don't think the episode yesterday will be a mere one-off. Volatility is back with a major bang so after sharp moves like what we saw overnight, pullbacks are likely to follow - as what we are seeing.
However, as long as the global economy continues to be gripped by the virus outbreak and the economic fallout remains consequential, it is hard to see how risk will rally all too much in a sustained manner.
When the markets are moving as such, the technicals become ever so important. As in the case for USD/JPY, watch out for the 105.00 level as well as the 100-hour moving average at 105.28. Changes in the near-term bias can give a good indication of shifts in sentiment.
