Market Analysis

The Japanese yen remains under pressure

FOREX

The Japanese yen remains under pressure and is currently trading at ¥111.70 against the US dollar, its lowest since April 2019, having lost more than 1.7% to the greenback since markets opened on Monday. The Japanese economy is facing a number of headwinds; several analysts believe the country’s economy to be on the verge of a recession, after the latest GDP number pointed at a year on year reduction in the size of the economy in the order of 6.3%. To make matters worse, the nation’s economic woes are being compounded by the coronavirus crisis, which is having an increasingly large impact on the region’s growth prospects. Several observers predict the next quarter to also point at a reduction in the size of the Japanese economy, which would translate into a technical recession. There may be further downside risk for the yen in the weeks ahead, especially if the coronavirus crisis persists in the region.

Ricardo Evangelista – Senior Analyst, ActivTrades

 

EUROPEAN SHARES 
Volatility increased this morning on EU stocks after most shares opened higher before registering steep declines in the first minutes of today’s trading session. This lack of direction underlines the state of uncertainty investors find themselves in as they digest the mixed economic developments from around the world. Investors aren’t very reassured by the slower death toll trend of the coronavirus in mainland China as new victims in other countries like Japan and South Korea spark fresh worries about the spread of the virus. In addition, the economic impact continues to grow in China after Beijing registered a significant 50% to 60% drop in smartphones sales during the 2020 spring festival. After airlines yesterday, it is now the turn of tech giants like Huaweï, who accounts for 1/3rd of the 60m unsold smartphones, to get hit by the crisis. Investors are becoming more and more cautious about risky assets like stocks as the Chinese economic outlook is degrading at a significant pace with more and more traders and analysts expecting poor data from Beijing in the coming weeks and months. Most European benchmarks remain steady as declines in consumer staples and communication services offset gains in the industrial sector. Telefonica is the worst performer in the Stoxx-50 Index so far after restructuring costs and Mexican operations hit its earnings. The company’s share price now trades below €6.30 and is challenging its 76.4% Fibonacci retracement level at €6.123.

Pierre Veyret– Technical analyst, ActivTrades

 

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