EURUSD and GBPUSD: Federal Reserve meeting. Pound continues to decline

Trading 29 avr 2020 Donner votre avis

Again, the euro made an unsuccessful attempt to grow against the US dollar during European trading after data that indicated a sharp increase in lending in the eurozone. However, traders are now more focused on the outcome of the meeting of the Federal Reserve System. Many expect the committee to leave rates unchanged but will announce new assistance programs, as well as expand the bond redemption program, which will support the country economy after the restart, which is now prolonged due to the coronavirus pandemic.

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Investors also expect Fed Chairman, Jerome Powell, to disclose information on what tools the central bank has prepared to withstand the economic downturn in the future, and what scenario will the regulator operate after the economy begins to gradually recover and bounce back. The coronavirus pandemic has significantly affected the US GDP and has already led to a noticeable contraction in the global economy.

It is expected that the US regulator will not resort to negative interest rates, at least in the near future, until the extent of the damage from the pandemic becomes more or less clear. It is possible that traders will respond to forecasts that will be published by the economists of the Federal Reserve System about how fast the economy will recover. If the reports are reviewed for the worse, compared with the previous meeting, pressure on risky assets may resume, and the US dollar will begin to grow against the euro and the pound that of which it has been preparing all this week.If the data do not differ much from the previous indicators, and if Powell declares that the economy is ready for a complete reset, then the euro may significantly strengthen against the US dollar, as the demand for risky assets will increase significantly.

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Although today's data from the European Central Bank allowed the euro to regain its position a little, somehow this did not lead to a more powerful upward correction. The report indicates that the eurozone M3 monetary aggregate in March this year grew immediately by 7.5% compared to March 2019 with a forecast of 5.4%. The moving average of the monetary aggregate from January to March grew by 6.0%.

As for the lending itself, the growth in March remained practical at the February level. The report indicates that lending to households in March increased by 3.4% compared to 3.7% in February, while lending to companies did increase immediately by 5.4% against 3.0% in February this year. This suggests that even then, many companies began to feel the problems associated with the spread of the coronavirus pandemic, and rushed to ask for access to cheap money.

The technical picture of the EURUSD pair has not changed much compared to the morning forecast. The resumption of the growth of the trading instrument is expected at the support of 1.0810. If buyers are able to hold it, then we can expect a second wave of growth to the resistance of 1.0870 and its breakdown, which will open the way for bulls to the highs of 1.0910 and 1.0940. If pressure on the pair persists, then a breakthrough of 1.0810 will necessarily lead to a larger sale of risky assets with a test of lows 1.0785 and 1.0730.

GBPUSD

The British pound is experiencing growth problems today and has already returned to the lows of the week. However, it is not possible to break below yet. Forecasts for UK GDP growth from various economic agencies continue to enter the market. A report came out today, which indicates that, in the case of restrictive measures for more than three months, UK GDP without the proper intervention of the Bank of England and the government in 2020 could be reduced by 12%. Such a negative outlook is designed in case strict containment measures are maintained until the end of June.

As for the technical picture of the GBPUSD pair , only a real breakthrough of the week's lows at 1.2350 will lead to the formation of a new downward trend. So far, all downward movements will be perceived by market participants as bargains at attractive prices. The first support levels are already visible around 1.2400. We can talk about the further implementation of the bullish scenario after breaking today's high at 1.2480, which will open a direct road to 1.2580 and 1.2640.

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

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