EUR/USD: trapped in a wide-range flat

Trading 24 mar 2020 Commentaire »

The euro-dollar pair is still marking time, although it shows a fairly high level of volatility. Buyers of EUR/USD since Friday regularly storm the eighth figure, but each time at the end of the trading session, the bears return the pair to its previous positions. However, sellers have also lost full control of the situation – any attempts at a more or less large-scale decline are used by traders to open long positions. As a result, the pair is forced to fluctuate within the seventh figure, alternately testing the eighth price level, then the sixth.

However, based on the results of the last three trading days, we can conclude that a large-scale correction is overdue for the pair. By and large, there is every reason for a significant price surge, both technical and fundamental. But traders still hold on to the dollar-rather instinctively, after the huge hype around the US currency. In addition, the greenback holds its position due to the status of a defensive asset – investors do not yet see a worthy alternative, although, for example, gold is actively gaining momentum. But the dollar is still the most attractive asset among the instruments of the foreign exchange market, a safe-have in times of troubles.

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In other words, the Federal Reserve's unprecedented steps to provide liquidity, the Senate's inability to accept a package of economic incentives, the spread of the epidemic in the United States - all these factors only hinder the growth of the US currency, but (so far) are not able to fundamentally reverse the situation with the EUR/USD pair. The news from Europe does not help the bulls, although Brussels is also taking extraordinary steps. In particular, the European Union approved the suspension of budget rules for the first time in history. The Stability and Growth Pact, which limits the state budget deficit of the eurozone countries to three percent of GDP, was "ordered a longer life." Moreover, in Brussels they did not say for what period they suspended the operation of this fundamental document.

Responding to this decision of the EU Council, the euro sharply rose in cross-pairs, however, together with the dollar, it was possible to allow only another correctional surge. This suggests that the dynamics of the pair depends only on the behavior and well-being of the dollar, while European events (and, accordingly, the reaction of the single currency) are optional.

In which direction does the pendulum swing? In my opinion, in the short term, the pair will continue to fluctuate within the range of 1.0650 - 1.0890 (the lower line of the Bollinger Bands indicator and the local maximum, respectively). For example, today or tomorrow, the dollar may receive support from the Senate if the Democrats and Republicans agree on a two trillion dollar economic stimulus package. According to Reuters, the parties were able to find a common denominator, and most likely will vote for the bill in the near future. Democrats twice - on Sunday and Monday - blocked this document. In their opinion, it does not provide enough money to the state hospital, does not provide social assistance to the unemployed in the right amount, and suggests too large a fund to help large businesses.

When this bill failed a second time, the dollar gave slack, making it possible for the EUR/USD bulls to re-enter the eighth figure. But the greenback regained the lost ground as soon as rumors of a compromise appeared. It can be assumed that in case of a positive outcome of the vote, the US currency will receive additional support, and will again test the sixth figure. However, this fundamental factor will not help the EUR/USD bears to overcome and gain a foothold below the support level of 1.0650. Whereas sellers need to confidently overcome this price target for the development of the downward trend. A corresponding news impulse is needed for such a price spurt, which again creates a stir around the US currency.

That is why the sellers of the pair need to be careful around the middle of the sixth figure - on Friday and Monday the bears stormed this support twice, but in each case it was unsuccessful.

Macroeconomic reports, both in Europe and in the US, are also ambiguous. For example, the US manufacturing PMI index reached 49.2 points, although experts expected it to be much lower - at around 43.5. But the preliminary PMI in the service sector in the United States reached a record low (39.2), while analysts predicted a higher result (44 points).

A similar situation has developed in Europe: if the manufacturing PMI indices came out better than the forecast values (although below the key 50-point level), then it was just a catastrophic failure in the service sector. For example, the French indicator fell to 29 points. On the one hand, the dynamics of the above– mentioned indices were predictable-tourism has died all over the planet, and production has been languishing for the second month. On the other hand, a not so steep decline in production indicators provided little support for both the euro and the dollar.

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As a result, the pair again stopped almost in the middle of the intraday price range, that is, in the middle of the seventh figure. In my opinion, EUR/USD will be stuck within this wide-range flat in the medium term – the bears will be waiting for support of 1.0650 at the bottom, at the top- a local high of 1.0890 (or a little higher - the resistance level of 1.0940, the lower boundary of the Kumo cloud on D1). Both bears and bulls need a fairly powerful and unusual information occasion to overcome the limits of the specified range.

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GBP/USD. March 24. Results of the day. Donald Trump’s dilemma: save the economy and have a high chance of re-election or

Trading 24 mar 2020 Commentaire »

4-hour timeframe

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Amplitude of the last 5 days (high-low): 272p - 680p - 320p - 523p - 268p.

Average volatility over the past 5 days: 413p (high).

The British pound is still the most volatile currency from the main basket. For example, during today's corrective day, the pound/dollar pair passed about 300 points. Thus, we can draw an almost unambiguous conclusion: the markets are saturated with purchases of the US currency, but remain in an overly excited state. The British currency stopped falling, but the pound/dollar pair has not grown. This means that for the most part, traders do not see the reasons and grounds for buying the British currency. The US dollar has ceased to be in demand on the basis of all the actions of the Federal Reserve, which announced an unlimited redemption of various kinds of securities in order to flood the economy with cash and save it from collapse. This is US President Donald Trump and Stephen Mnuchin who failed to push through Congress a bill that involves injecting an additional $1.6 trillion into the economy, which should have been directed to help the US population (each citizen can get about $1000), to help airlines, some of which are on the verge of bankruptcy, as well as helping small businesses that are also experiencing, for obvious reasons, not the best of times. Nevertheless, by majority vote, the bill was already blocked twice in the Senate, mainly due to the fact that it is opposed by the Democrats, who consider this package of assistance to be too expensive and aimed mainly at helping companies, rather than US workers. Democrats also believe that Trump wants to once again be promoted through such packages of assistance to the US population, because presidential elections will be held this year ...

Meanwhile, business activity data for various sectors of the economy have also been released in the UK today. The numbers are almost identical to European. In the services sector, business activity in Great Britain crashed down to a preliminary estimate of 35.7 in March. In the manufacturing sector - 48 (!!!). Thus, the picture is the same as in Germany and in the European Union. The service sector collapsed, and the manufacturing sector shows a slight slowdown in business activity. The United States is still more interesting. The decline was significantly higher than experts expected in the services sector. The actual value is 39.1 with the February value of 49.4. But the production sector lost only a few points and amounted to 49.2. Such a value in current realities can even be called high. Composite PMI was 40.5 points. Thus, in general, the situation is approximately the same both in the United States and in Europe.

Meanwhile, Trump, who seems to be thinking much more about how to win the presidential race this year than about the health of his fellow citizens, offers to abolish all quarantine measures. On his Twitter, the US president made a cryptic entry: "treatment of a problem cannot be worse in consequences than the problem itself." Despite the fact that the Fed and the Ministry of Finance are doing everything possible to save the economy, the US leader believes that a significant reduction cannot be avoided. And the longer the quarantine lasts, the stronger the reduction. And on the eve of the election, Trump does not need a contraction in the economy. It is precisely the growth of the US economy that the head of the White House has repeatedly pressed in his election speeches. Thus, now that the US economy can roll back to 2016 levels, Trump is losing one of his main trump cards before the Democrats. "Our country was not created for closure. We are going to open our country to business, because our country must be open," Trump said this week. At the same time, medical experts believe that the United States has not even entered the most critical stage of the epidemic. That is, the peak of the spread of the virus is yet to come. And if quarantine is now lifted, then the number of sick people will increase many times over. The US president needs a strong economy, so "let's give everyone $1,000 each and kick them back to work." However, many experts believe that "to kill two birds with one stone" in this situation will not work. If you open the economy, the infection curve will change its appearance, that is, the number of infected people will simply increase. If this is not done, then the economy will not be revived in the near future. Therefore, the dilemma: what is more important to Trump - to raise the economy or the lives of his own citizens?

Meanwhile, some agencies are already beginning to calculate the possible losses to the UK economy from a pandemic. The figures are terrifying. Experts believe that the British economy could shrink by 5%. And again, everything will depend on how long the quarantine lasts and how quickly the spread of infection can be stopped. According to the latest data, almost 7,000 people have already become infected in Britain. A bit compared to other countries. However, the infection continues to spread.

From a technical point of view, the British pound continues to adjust. The correction is very weak, more even lateral. However, for the British currency, the absence of a new fall against the US currency is already happiness. In our opinion, the pound may calmly resume falling in the coming days, as markets remain in a state of panic. And since now the main task of each trader and investors is to preserve their assets, and there is no better way than buying dollars, in the general opinion, it is the dollar that can resume growth in the coming days. As you can see, today's statistics from the UK and the United States was not the basis for the purchase of the British pound. Most likely, the pound is growing solely on technical factors.

Recommendations for short positions:

The pound/dollar pair resumed corrective movement on the 4-hour timeframe. Thus, sales of the pair with the goal of the first support level of 1.1229 are still relevant, but only in case of a price rebound from the Kijun-sen line.

Recommendations for long positions:

Buying the GBP/USD pair is recommended only if quotes return to the area above the critical line with the first goal, the resistance level is 1.2242. However, when opening any positions, it is recommended to act as carefully as possible and remember about the increased risks.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicators window.

Support / Resistance Classic Levels:

Red and gray dashed lines with price symbols.

Pivot Level:

Yellow solid line.

Volatility Support / Resistance Levels:

Gray dotted lines without price designations.

Possible price movements:

Red and green arrows.

The material has been provided by InstaForex Company - www.instaforex.com

U.S. New Home Sales Pull Back Off Nearly Thirteen-Year High In February

Trading 24 mar 2020 Commentaire »

After reporting a jump in U.S. new home sales in the previous month, the Commerce Department released a report on Tuesday showing home sales pulled back sharply in the month of February.

The Commerce Department said new home sales tumbled by 4.4 percent to an annual rate of 765,000 in February after spiking by 10.5 percent to an upwardly revised rate of 800,000 in January.

With the upward revision, the annual rate of new home sales in January was the highest since reaching 842,000 in May of 2007.

Economists had expected new home sales to slump by 1.8 percent to a rate of 750,000 from the 764,000 originally reported for the previous month.

The bigger than expected decrease was partly due to a substantial pullback in new home sales in the West, which plunged by 17.2 percent in February after soaring by 28.8 percent in January.

New home sales in the Midwest also tumbled by 7.3 percent, while home sales rose by 1.0 percent in the South and skyrocketed by 38.9 percent in the Northeast.

The report also said the median sales price of new houses sold in February was $345,900, up 6.3 percent from a revised $325,300 in January and up 7.8 percent from $320,800 in the same month a year ago.

The estimate of new houses for sale at the end of February was 319,000, representing 5.0 months of supply at the current sales rate.

Last Friday, the National Association of Realtors released a separate showing existing home sales jumped to a thirteen-year high in the month of March.

NAR said existing home sales surged up by 6.5 percent to an annual rate of 5.77 million in February after slumping by 2 percent to a rate of 5.42 million in January. Economists had expected sales to climb by 0.7 percent.

With the much bigger than expected increase, existing home sales reached their highest level since February of 2007.


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Dollar Little Changed After U.S. New Home Sales

Trading 24 mar 2020 Commentaire »

Following the release of U.S. new home sales for February at 10:00 am ET Tuesday, the greenback changed little against its major counterparts.

The greenback was trading at 111.15 against the yen, 0.9794 against the franc, 1.0810 against the euro and 1.1749 against the pound around 10:03 am ET.


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*U.S. New Home Sales Slump 4.4% In February

Trading 24 mar 2020 Commentaire »

U.S. New Home Sales Slump 4.4% In February


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Dollar Mixed Ahead Of U.S. New Home Sales

Trading 24 mar 2020 Commentaire »

U.S. new home sales for February are scheduled for release at 10:00 am ET Tuesday. Ahead of the data, the greenback traded mixed against its major rivals. While the greenback held steady against the pound, it recovered against the rest of major rivals.

The greenback was worth 1.0803 against the euro, 110.97 against the yen, 0.9779 against the franc and 1.1743 against the pound as of 9:55 am ET.


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BoE’s FPC Says Ready To Take Further Actions To Support Stability

Trading 24 mar 2020 Commentaire »

The Financial Policy Committee of the Bank of England said it is ready to take any action needed to support UK financial stability.

According to BoE's Financial Policy Summary and Record, released Tuesday, the backdrop to the Committee's March meetings has been dominated by the outbreak and spread of Covid-19.

The FPC assessed that major UK banks are well able to withstand severe market and economic disruption. Also, household vulnerability is considerably lower than before the financial crisis.

At the March meeting, the FPC together with the Prudential Regulation Committee decided to cancel its 2020 stress test of major banks. This will help lenders focus on meeting the needs of UK households and businesses via the continuing provision of credit, the bank said.


The material has been provided by InstaForex Company - www.instaforex.com

UK Manufactures See Sharp Fall In Output: CBI

Trading 24 mar 2020 Commentaire »

UK manufacturers reported declines in both total and exports orders in March and their expectations for production fell the most since the financial crisis in 2009, survey results from the Confederation of British Industry showed Tuesday.

The order books balance fell to -29 percent from -18 percent in February. Likewise, the export order books balance declined to -28 percent from -17 percent.

A balance of -20 percent expect output volumes to contract at a faster pace in the next three months, the weakest expectations since the financial crisis in 2009.

"The manufacturing sector is facing unprecedented challenges due to COVID-19, such as widespread disruption to supply chains and weakening demand due to domestic containment measures," Anna Leach, CBI deputy chief economist, said.

With expectations for output set to fall in the coming months, it's now more important than ever manufacturers get the support they need, she said.


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*Yen Falls To New 4-week Low Of 113.74 Versus Franc

Trading 24 mar 2020 Commentaire »

Yen Falls To New 4-week Low Of 113.74 Versus Franc


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*Yen Drops To Near 2-week Low Of 120.29 Versus Euro

Trading 24 mar 2020 Commentaire »

Yen Drops To Near 2-week Low Of 120.29 Versus Euro


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