WTO Warns Of Downside Risks From Second Wave Of Coronavirus Infections

Trading 06 oct 2020 Commentaire »

Global trade volume is likely to fall less than earlier estimated this year, and the expected rebound next year will not return it to pre-crisis levels, the World Trade Organization said Tuesday, as it warned of downside risks from a resurgence of coronavirus infections over the coming months. The volume of world merchandise trade is set to decline 9.2 percent this year, which is much less than the 12.9 percent slump predicted in an optimistic scenario in April. The strong trade performance in June and July, mainly driven by solid trade in Covid-19 related products as governments stocked up on supplies, suggest optimism for overall trade growth in 2020.

Next year, merchandise trade volume is expected to grow 7.2 percent, but remain well below the pre-crisis level. The latest forecast is more pessimistic than the robust 21.3 percent rebound predicted earlier.

The estimates are subject to an unusually high degree of uncertainty as they depend on the evolution of the pandemic and government responses to it, the WTO said. Global trade shrunk a record 14.3 percent sequentially in the second quarter, but recent data has suggested a partial rebound in the third quarter. "Risks to the forecast are firmly on the downside," the WTO said. "There is some limited upside potential if a vaccine or other medical treatments prove to be effective, but their impact would be less immediate."


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Analytics and trading signals for beginners. How to trade EUR/USD on October 7? Getting ready for Wednesday session

Trading 06 oct 2020 Commentaire »

Hourly chart of the EUR/USD pair

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On Tuesday, October 6, the EUR/USD pair tried to resume the upward movement since the day began, but failed to overcome the previous local high of 1.1798. Two more attempts were made to resume the upward movement, but the pair rebounded off $1.18 each time. And so we observed a horizontal correction throughout the trading day. At the same time, the MACD indicator turned to the upside in the afternoon, but it previously failed to go down to the zero mark, which would mean its complete discharge and readiness to form new buy signals. In the morning, we recommended novice traders to wait for the correction and open new buy positions only after it is completed. In fact, there was no downward correction, as a result of which the MACD indicator generated a false signal (the second circle in the illustration). Therefore, the trend remains upward, and novice traders are still encouraged to wait for the downside correction to the upward trend line.

No macroeconomic report from the European Union and the United States on Tuesday. However, markets are currently ignoring data anyway, so this fact did not really matter. European Central Bank President Chrisitne Lagarde spoke during the day, who said that the central bank could go for new monetary easing to stimulate economic recovery. Lagarde is worried about the high rate of the euro, which negatively affects inflation and the pace of recovery. She also believes that the second wave of the coronavirus epidemic may strike the European economy again and no one knows what this blow will be. Also today, Federal Reserve Chairman Jerome Powell spoke, urging the US Congress to approve a new stimulus package for the American economy as soon as possible. "Lack of government support will lead to a weak recovery and create unnecessary hardship for households and businesses," Powell said. The Fed chair, like his European counterpart, fears that the economic recovery will slow down.

Lagarde is set to deliver a speech in the EU on Wednesday, October 7, and the minutes of the last Fed meeting will also be published on this day in the United States. In fact, both of these events will not have any effect on the euro/dollar pair. There was no particular response to Lagarde's recent speech and the Fed minutes is just a document summarizing the results of the last meeting in writing, which markets already know most of the time. Thus, scheduled events are unlikely to elicit a reaction from traders.

Possible scenarios for October 7:

1) Buy positions on the EUR/USD pair remain relevant at the moment, since the upward trend line has been rebuilt and supports the bullish traders. Thus, we recommend novice traders to open new buy orders while aiming for 1.1819 and 1.1854 after the price corrects downward to the upward trend line and a new buy signal from MACD is generated. And so by tomorrow morning, we can see at what stage the pair is when we implement this plan.

2) Sell positions may become relevant again if the pair settles below the trend line. In this case, the first target will be the 1.1696 level, and we can only count on the pair's successive fall if we overcome this level. Take note that the dollar is very reluctant to rise in price, and the fundamental background is not in its favor.

On the chart:

Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.

Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.

The MACD indicator (10,20,3) consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).

Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid a sharp price reversal.

Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.

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EUR/USD. Flat and apathy: Powell unable to stimulate the pair. Focus is on Fed minutes

Trading 06 oct 2020 Commentaire »

Flat and complete apathy – this is how you can describe today's trading on the foreign exchange market. Key pairs show low price activity, perhaps with the exception of the pound-dollar pair. But it is very risky to trade this pair now, as incoming news about Brexit prospects seems contradictory. Optimistic signals alternate with pessimistic estimates, and the British currency is forced to respond to each attack in the information space. However, despite the increased volatility, the pound ends the trading day almost at the same level where it started. All the other pairs were literally marking time today, trading in an extremely narrow price range.

The euro-dollar pair is no exception. Starting the day at 1.1783, the pair passed a small circle around this mark, and still "landed" at 1.1780 at the end of the day . The price fell to the daily low of 1.1764 and updated the high at 1.1808. But in the end, neither buyers or sellers of EUR/USD were able to turn the situation in their favor. Even Federal Reserve Chairman Jerome Powell, who spoke at an online conference today, could not support the bulls or bears. First of all, his speech was quite balanced, and secondly, he had already voiced many theses earlier. Therefore, traders took into account what was said, but still did not risk opening large positions both in favor and against the dollar.

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Perhaps the most important message voiced by Powell is that the Fed is not considering the option of introducing negative rates. If the economic recovery is "slower," rates will stay at the lower end of the range for longer, he said. This is quite an important signal to the markets, although traders reacted apathetically to what was said. It is worth recalling that the head of the Bank of England, who for a long time rejected the idea of reducing the rate to zero, is currently preparing the ground for this step. Some experts assumed that Powell would hypothetically allow such a scenario – at least in order to reduce the exchange rate of the US currency.

But Powell did not play these verbal games and completely ruled out this scenario. The weak reaction of traders to this fact is explained by the psychology of the market. The fact is that the probability of a Fed rate cut in the negative area was quite small until today, so another confirmation of this fact did not impress investors. As an opposite example, we can cite today's meeting of the Reserve Bank of Australia, which caused the AUD/USD pair to jump by almost 50 points in a few minutes. In this case, the market estimated the probability of a rate cut at 60%, so the RBA's wait-and-see position played in favor of the Australian dollar (although it lost all positions during the day, but this is a topic for a separate conversation).

In other words, Powell was unable to provide momentum to dollar pairs today. All his other theses were already familiar or obvious. For example, he stated that the pace of economic recovery has slowed down since the end of May. Powell also admitted that unemployed Americans, as well as representatives of small/medium-sized businesses, need additional help. This is also not news. As you know, the Democrats were able to push their bill in the House of Representatives last week in order to provide the American economy with additional assistance worth $2.2 trillion. But with a probability of 100% we can say that this document will never become law, since the Republicans oppose it, and the Democrats need the support of the Senate for its approval. And as you know, the Republicans control the majority in the Senate. That's it, the circle is closed.

However, representatives of the Democratic Party are in parallel negotiations with the White House to develop a new aid package. But, despite the optimistic announcements, "things are still there": the sides have not been able to find a compromise on this issue for the third month already.

Against the background of such uncertainty, the question arises: in which direction will the pendulum swing? In the direction of the dollar or the euro? This is a rather difficult question, but at the same time it is obvious that both the bulls and the bears are waiting for an information impulse. Such an impulse may be the minutes of the last Fed meeting, which will be published tomorrow, October 7.

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Let me remind you that the dollar received temporary support following the results of the September meeting. This is due to a certain split in the Fed's camp, and above all, the statement of Robert Kaplan, who called on his colleagues to take a more flexible approach to the implementation of the new strategy. However, it is worth noting here that the split among the Fed members occurred in two directions. While Kaplan favored a more flexible approach, Neil Kashkari voiced the opposite idea. In his opinion, the rate should remain at zero until core inflation exceeds the target level "on a stable basis".

The minutes of this meeting published tomorrow will allow us to understand which side is supported by the other members of the central bank. If the opinions of most of them were hawkish, the dollar will strengthen throughout the market. Otherwise, buyers will get a reason to test the 1.1820 mark and the next resistance level of 1.1870 (the upper limit of the Kumo cloud on the daily chart). At the moment, the pair is stuck at a crossroads - both from a technical point of view and from the perspective of the foundation.

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ECB will restrain the euro’s growth

Trading 06 oct 2020 Commentaire »

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Euro bulls played positive statistics, US President Donald Trump's recovery has already been taken into account in prices. However, it is worth noting that he has not completely recovered from the virus, which means that his condition may well deteriorate. This is not just an assumption, this is the warning issued by the chief infectious diseases specialist of the United States.

However, Trump is optimistic and is preparing to participate in the next debate, which is scheduled for October 15. Accordingly, there is a positive reaction from investors, and risk appetite is improving.

The main currency pair was close to 1.1800 today. Buyers have not yet managed to test this level, but the chances are quite real. Due to the current circumstances, we can consider the euro's growth to the value of 1.1830 against the dollar

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Traders who bet on the dollar's fall against the euro expect that America will launch a new flow of liquidity. This may happen at the last moment before the election, in the process of a deal between the White House and the Democrats. In the worst case, after the elections, which the Democrats are likely to win.

A pullback to the downside is also possible for the EUR/USD pair. The first target in this case will be 1.1750 and 1.1740. Speeches from the heads of two major central banks, Christine Lagarde and Jerome Powell, added uncertainty for euro buyers on Tuesday. It is important for markets whether they will affect monetary policy.

The ECB chief made it clear to markets that the economic recovery in the eurozone has lost momentum. The restrictive measures imposed in some countries, such as Spain, France and Germany, suggest a further deterioration of the macroeconomic climate in the coming weeks..

The European Central Bank may lower expectations for inflation and economic growth in December, when it releases updated forecasts. In the absence of a positive shift, that is, if there is no medicine or vaccine for the coronavirus, the regulator will have to act. Financial officials may take new measures to limit short-term deflationary risks.

All this will result in a revision of the inflation target or an increase in the volume of the asset purchase program. This scenario will become more justified when the EUR/USD pair returns to the 1.20 area. Earlier, when this happened, the ECB carried out verbal interventions in order to contain the euro's growth.

Meanwhile, currency strategists for the most part consider it unjustified that the euro has been rising in price in recent months. The current situation does not imply a strong weakening of the dollar and the growth of the single currency. The euro is expected to fall to 1.1300 by the end of the year. The ECB must take additional measures in response to dangerously low inflation, which continues to decline.

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Indonesia Consumer Confidence Weakens In September

Trading 06 oct 2020 Commentaire »

Indonesia's consumer confidence weakened in September after improving in the previous few months, survey data from Bank Indonesia showed on Tuesday. The consumer confidence index fell to 83.4 from 86.9 in August. Sentiment deteriorated in 13 out of the 18 cities surveyed, most significantly in Jakarta, the bank said. Consumers' expectations regarding economic conditions in the next six months weakened due to lower optimism on business performance, job opportunities, and income. Expectations on the current economic situation and conditions for buying durable goods also weakened.


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*WTO: Downside Risks Still Predominate, Particularly On Resurgence Of COVID-19 Cases In Months Ahead

Trading 06 oct 2020 Commentaire »

WTO: Downside Risks Still Predominate, Particularly On Resurgence Of COVID-19 Cases In Months Ahead


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*WTO: World Trade Volume Growth To Rebound To 7.2% In 2021, Remain Well Below Pre-crisis Trend

Trading 06 oct 2020 Commentaire »

WTO: World Trade Volume Growth To Rebound To 7.2% In 2021, Remain Well Below Pre-crisis Trend


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*WTO: 2020 World Merchandise Trade Volume Forecast To Fall 9.2% Vs. 12.9% Drop Seen In April

Trading 06 oct 2020 Commentaire »

WTO: 2020 World Merchandise Trade Volume Forecast To Fall 9.2% Vs. 12.9% Drop Seen In April


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Australia Government Unveils Fresh Stimulus

Trading 06 oct 2020 Commentaire »

Australia's government unveiled fresh fiscal stimulus measures on Tuesday, pushing the budget deficit to a record level as the economy faces significant challenges from the once-in-a-century coronavirus pandemic.

"There is no economic recovery without a jobs recovery," Treasurer Josh Frydenberg told lawmakers. "There is no budget recovery without a jobs recovery."

The unemployment rate is expected to peak at around 8 percent in the December quarter. The jobless rate is seen at 7.25 percent in 2020-21 before falling gradually to 5.5 percent in 2023-24.

Real GDP is forecast to fall by 3.75 percent in 2020 before recovering in 2021 to grow by 4.25 percent.

According to the budget 2020-21, the underlying cash deficit will widen to A$213.7 billion, but decline to A$112 billion next year and to A$87.9 billion in 2022-23.

Net debt is shown to increase to A$703 billion or 36 percent of GDP this year, and peak at A$966 billion or 44 percent of GDP in June 2024.

"This is a heavy burden, but a necessary one to responsibly deal with the greatest challenge of our time," Frydenberg said.

The treasurer brought forward the stage two income tax cuts to July 2020 from July 2022. More than 7 million Australians receive tax relief of A$2,000 or more this year.

To kick-start investment, Frydenberg announced an instant asset write off for businesses with a turnover of up to A$5 billion. Over 99 percent of businesses will be able to write off the full value of any eligible asset they purchase for their business.

The treasurer unveiled a new JobMaker hiring credit to encourage businesses to hire younger Australians. The hiring credit will be available immediately to employers who hire those on JobSeeker aged 16-35.

For increasing home ownership and support jobs in the construction industry, he announced assistance for first time home buyers.

An additional 10,000 first home buyers will be able to purchase a new home sooner under First Home Loan Deposit Scheme, he said.

The budget also includes second Women's Economic Security Statement, with A$240 million in measures and programs.

Marcel Thieliant, an economist at Capital Economics, said the income tax cuts and other stimulus measures unveiled in today's Budget are estimated to provide fiscal support of around 2.5 percent of GDP in 2021/22.

That won't prevent a major tightening in fiscal policy as the huge support provided during the pandemic tapers off, the economist added.


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Dollar Little Changed After U.S. Trade Data

Trading 06 oct 2020 Commentaire »

Following the release of U.S. trade data for August at 8:30 am ET Tuesday, the greenback changed little against its major counterparts.

The greenback was trading at 105.62 against the yen, 1.2957 against the pound, 1.1802 against the euro and 0.9137 against the franc around 8:32 am ET.


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