• XAU/USD bulls are eying at the 2020 highs.
  • Buyers' short term targets can be located near the 1610.30 and 1614.31 levels.

Gold daily chart

XAU/USD is trading in a bull trend above the main daily simple moving averages (SMAs). Gold is rising in a bullish channel as the market is challenging $1600 per ounce.

Gold four-hour chart

XAU/USD is breaking above the 1600 mark. Bulls want to extend gains towards 1610.30 and 1614.31 resistance levels as bulls remain firmly in control. On the flip side, pullbacks down may find support near the 1589.38, 1584.39 and 1579.40 levels, according to the Technical Confluences Indicator.

Resistance: 1599.35, 1610.30, 1614.31

Support: 1589.38, 1584.39, 1579.40

Additional key levels

China will stabilise foreign trade, foreign investment and consumption to minimise the impact of the coronavirus outbreak, China’s Commerce Ministry said on Tuesday.

"China will encourage firms to boost imports of medical supplies and agriculture goods," the statement further read, per Reuters. "Will step up polices to stabilise foreign investment, underpin confidence of investors."

Risk aversion

This statement failed to provide a boost to market sentiment. As of writing, the Dow Jones Industrial Average was down 0.6% on the day and the 10-year US Treasury bond yield was erasing 2.55%.

  • GBP/USD is gaining steam above the 1.3000 figure.
  • The level to beat for buyers is the 1.3080 resistance.

GBP/USD daily chart

Following the October and December bull-run, pound/dollar is trading in a rectangle consolidation above the 100/200-day simple moving averages (SMAs). The spot is trading below the 1.3100 and 50 SMA.

GBP/USD four-hour chart

The pound is rebounding from the 1.3000 support while challenging the 200 SMAs on the four-hour chart. Bulls seem unwilling to let go, however they need to overcome the 1.3080 level to reach the upper side of the range near 1.3125 and 1.3160 levels. Supports are likely located near 1.3000, 1.2958 and 1.2931 level, according to the Technical Confluences Indicator.

Resistance: 1.3080, 1.3125, 1.3160

Support: 1.3000, 1.2958, 1.2931

Additional key levels

  • German ZEW Economic Sentiment slumped to 8.8 in February vs. 21.5 expected.
  • NY Fed's Empire State Manufacturing Index rose sharply in February.
  • US Dollar Index rose toward 99.50 but lost its traction.

The EUR/USD pair came under strong selling pressure in the early trading hours of the American session and touched its lowest level since April of 2017 at 1.0786 before staging a rebound. As of writing, the pair was trading at 1.0813, still down 0.2% on a daily basis.

The broad USD strength seems to have triggered the selloff. After the Federal Reserve Bank of New York announced that the headline General Business Conditions Index of the Empire State Manufacturing Survey surged to 12.9 in February to beat the market expectation of 5, the US Dollar Index (DXY) gained traction and advanced to its highest level since early October at 99.47.

However, the poor performance of the US Treasury bond yields made it difficult for the USD to preserve its bullish momentum and helped the pair recover from lows. The DXY is now steady near the 99.30 area, where it was up 0.15% on the day.

Economic sentiment continues to deteriorate in Germany

On the other hand, the ZEW Economic Sentiment Index for Germany slumped to 8.7 in February from 26.7 and missed the market expectation of 21.5 by a wide margin to weigh on the shared currency.

Commenting on the findings, "expectations regarding the development of the export-intensive sectors of the economy have dropped particularly sharply," said ZEW President Professor Achim Wambach. "Besides, the end of 2019 and the beginning of 2020 saw a worse-than-expected development of the German economy."

There won't be any other macroeconomic data releases from the US in the remainder of the session and the USD's market valuation is likely to continue to drive the pair's action.

Technical levels to watch for

  • AUD/USD is having a modest bounce after bears attempted to reach the 2020 low.
  • AUD/USD is consolidating losses near the 0.6700 figure.

AUD/USD daily chart

The aussie is bouncing from one-decade lows while trading well under its main daily simple moving averages (SMAs). AUD/USD tried to reach the 2020 low but is finding some support as the market is staying in a range near the 2020 lows. Bears want to resume the bear trend by breaking below the 0.6668 support and targetting the 0.6640 and 0.6626 levels. On the flip side, bulls want to create a reversal up and overcome several layers of resistance to reach the 0.6753 level, according to the Technical Confluences Indicator.

Resistance: 0.6700, 0.6723, 0.6753

Support: 0.6668, 0.6640, 0.6626

Additional key levels

Coronavirus supply chain issues may have a lingering effect on the US technology sector, Fitch Ratings said on Tuesday, as reported by Reuters.

"Near-term revenue weakness caused by supply chain disruptions and reduced demand in China is a likely outcome for the US technology companies," the report read. "COVID-19 adds additional risks to the US technology sector's china-centric supply chains."

Fitch further noted that the impact could be more disruptive is the coronavirus situation drags into March and April.

Tech shares underperform on Tuesday

The S&P 500 Technology Index is down 0.6% in the early trade. Apple shares, which warned that sales in Q1 could fall short of its target amid coronavirus, are leading the losers with a 2.5% drop.

  • DXY pushes higher and clinches new yearly highs near 99.50.
  • Renewed concerns around the Chinese coronavirus support the dollar.
  • NY Empire State index came in above expectations in February.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main competitors, is trading on a firmer footing and printing new peaks in the mid-99.00s on Tuesday.

US Dollar Index stronger on risk-off mood, EUR-selling

The index has picked up extra pace in the first half of the week and printed new highs in the vicinity of 99.50, levels last seen in October 2019. The rally in the buck thus remains unaltered despite current overbought levels (RSI around 75.0) and after posting gains in ten out of the last twelve sessions (up more than 2% in February).

Positive results from the US fundamentals, renewed risk-off sentiment on the back of the fast-spreading COVID-19 in China and, mainly, the exacerbated weakness around the euro have all been sustaining the sharp advance of DXY so far this month.

On Tuesday’s docket, the NY Empire State manufacturing index surprised to the upside in February, improving to 12.9 from January’s 4.80 and forecasts at 5.00. Later in the NA session, the NAHB index is due along with December’s TIC Flows.

What to look for around USD

The index has extended the march north to new 2020 highs near 99.50 on Tuesday, keeping the bid bias unaltered for the time being. Investors are expected to keep looking to the performance of US fundamentals and the broader risk appetite trends for direction as well as any fresh developments from the COVID-19. In the meantime, the outlook on the dollar remains constructive and bolstered by the current “appropriate” monetary stance from the Fed vs. the broad-based dovish view from its G10 peers, the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency”.

US Dollar Index relevant levels

At the moment, the index is gaining 0.25% at 99.39 and a breakout of 99.47 (2020 high Feb.18) would aim for 99.67 (2019 high Oct.1) and finally 100.00 (psychological barrier). On the flip side, immediate contention emerges at 98.80 (23.6% Fibo retracement of the February rally) seconded by 98.54 (monthly high Nov.29 2019) and then 98.30 (21-day SMA).

National security shouldn't be used as an excuse to make the United States a difficult country to trade with, US President Donald Trump argued in a Twitter thread on Tuesday.

"The United States cannot, and will not, become such a difficult place to deal with in terms of foreign countries buying our product, including for the always used national security excuse," Trump tweeted out. "We want to sell product and goods to China and other countries. That’s what trade is all about. We don’t want to make it impossible to do business with us."

Trump concluded by saying that he wants to make it easy for other countries to do business with the US and added: "The United States is open for business."

Market reaction

These comments failed to help the market sentiment improve and Wall Street's main indexes are down between 0.2% and 0.4% in the early trade.