Euro Declines on Weak Sentix Investor Sentiment Index

Euro Declines on Weak Sentix Investor Sentiment Index
February 11, 2020

 

The euro dollar declined against the Aussie yesterday after Sentix, the behavioral research institute, reported a decline in the investor sentiment in the Eurozone. The Australian dollar is strengthening on the announcement of fresh loans by China to nullify the impact of coronavirus on its economic activity. China is the largest trading partner of Australia. So, in general, the Australian dollar acts as a proxy to sentiments related to China. In the past 24 hours, the EUR/AUD pair has declined from a high of 1.6424 to a low of 1.6330.

After moving up in the past three months, the Eurozone investor sentiment declined in February as investors were worried about the economic uncertainty caused by the coronavirus epidemic in China. The Sentix investor confidence index fell to 5.2, from 7.6 in January. Likewise, the current situation index declined to 4.0 in January, from 5.50 in the earlier month. The expectations index decreased to 6.50, from 9.80.

1086 investors were surveyed by Sentix between February 6 and 8. Notably, the German investor sentiment index fell only by 2.1 points. The statistical organization opined that the strong US economy continues to support global sentiment.

The coronavirus outbreak that originated in the Chinese city of Wuhan has already claimed more than 900 lives, and over 40,000 are confirmed to have been affected by the virus. Several countries in South Asia and Europe have confirmed cases, with the Philippines reporting one death last week. Several countries have announced restrictions on travel to China.

Sentix pointed out that the coronavirus outbreak has significantly changed the global economic outlook. “While at the beginning of the year there was still a clear upswing scenario for the global economy, the outbreak of the coronavirus in China has changed the situation significantly.”

The Group further stated that the effect on China would be significant. Sentix issued the following statement regarding the global economic outlook. “So far, however, the effects on the economy have been relatively limited from the point of view of the investors surveyed by Sentix, even if they are significant for China.”

While the Eurodollar is weakening on weak Sentix investor sentiment data, the Aussie is strengthening on fresh economic stimulus announced by Beijing.

The Peoples Bank of China (PBoC) has announced measures to negate the negative impact of coronavirus on the economy. The central bank has started disbursing loans worth 300 billion yuan through its re-lending program as part of an initiative to assist enterprises affected by the coronavirus epidemic. The facility will be offered weekly to banks.

Nine top national banks and quite a few local banks in ten provinces and cities are eligible for special funding, as per PBoC Deputy Governor Liu Guoqiang.

Mundy, a currency strategist with Commonwealth Bank of Australia, stated that the Australian dollar’s uptrend was mainly due to the economic stimulus announced by China.

Mundy said the Aussie rally comes against the backdrop of “further targeted PBoC easing and news reports that some Chinese production would re‑start.”

However, Mundy opined that the Aussie uptrend would not last long. “AUD upside will remain limited while there is ongoing uncertainty around the coronavirus and its subsequent dampening impact on the Chinese and global economy.”

The Sentix economic data is expected to keep the euro weak in the short-term.

The historical price chart indicates that the EUR/AUD pair is declining after facing resistance at 1.6445. The next support is anticipated only near 1.6280. Additionally, the stochastic oscillator is also making new lows. Therefore, we are expecting the currency pair to decline further in the short-term.

EUR - technical analysis - 11th Feb 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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