Strong Risk-On Week; Potential Profit Taking Makes Shorts Attractive

The risk-on markets have had a superb week. However, the short-term oscillators are overbought and will need to normalize. Moreover, a coronavirus drug breakthrough has been downplayed by the WHO,  which stated that there are “no known” drug treatments against the virus. These two variables may combine to push down risk markets.

GER30 Trades At Overhead Resistance on 1H

The GER30 has appreciated remarkably during the week and has run up to resistance around the 13,590 level (red shaded horizontal). To this end, it’s stochastic has turned down from an overbought area (aqua ellipse). If the index’s green 5-hour EMA crosses below its orange 10-hour EMA (red ellipse) and develops angle and separation than it may indicate profit taking and that the market is moving towards a more risk-off sentiment as coronavirus fears re-emerge.

UKOil Looking To Break Out Of Bearish Contiuation Pattern on 1H

UKOil’s green 5-hour EMA has crossed below its orange 10-hour EMA (red ellipse). This coincides with a potential break out of a bearish flag continuation pattern. It is also noteworthy that the stochastic shows a negative divergence and has turned down bearishly (aqua ellipse). If the EMAs develop further angle and separation it will likely signal further downside momentum. This breakdown is due to a slowdown in Chinese demand for crude, which has been hit hard by the exogenous supply shocks caused by the coronavirus outbreak.

AUDUSD Potentially Pressured By Coronavirus On 1H

The AUDUSD’s green 5-hour EMA has crossed below its orange 10-hour EMA (red ellipse) and its stochastic has turned negative (aqua ellipse). The Aussie is positively correlated to the economics coming out of China and is weakening as the economic backdrop in China declines from the coronavirus outbreak; now that the market may be paying attention to the epidemic once again. The currency pair is likely to weaken further if the EMAs develop further angle and separation.