EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(March 16 - March 20, 2020)
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US Dollar Fundamental Outlook: Coronavirus Gets Out Of Control; Fed Unleashes Bazooka - Cuts Rates To Zero And Launches QE4
With the coronavirus now officially declared a global pandemic by the WHO, central banks have stepped in with full power and unleashed massive monetary stimulus.
The US Federal Reserve took another unexpected step and decided to cut interest rates by 100bp and restarted quantitative easing of at least $700 B in another emergency meeting on Sunday night, instead of waiting for their regular meeting on March 18. The Wednesday meeting has now been canceled due to the coronavirus quarantine measures, and instead, Chairman Powell held an audio press conference last night. The Fed’s interest rate cuts and QE are aimed
to help households and businesses live through the coronavirus crisis by ensuring credit is available to everyone who needs it in these difficult times.
The announcement didn’t have a huge impact on markets at the open with the US Dollar only marginally lower at the moment. However, everyone is monitoring the developments closely with world G7 leaders set to meet today to discuss possible further measures for dealing with the coronavirus. New announcements can swing the markets in either direction as volatility is to remain elevated. With that said, the outlook for markets and the Dollar at this moment remains
highly uncertain.
Euro Fundamental Outlook: Europe Becomes The Epicenter Of Coronavirus Pandemic; A Severe Recession Now Almost Certain
The spread of the coronavirus in Europe seriously accelerated over the past week, and the old continent is now considered the world’s epicenter of the coronavirus pandemic. Europe has +50,000 confirmed cases out of the +170,000 cases globally as of this moment. But the rate of spreading is accelerating further in Europe across several countries, including Italy, Spain, France, and Germany; and those numbers could get significantly higher in the
next few days.
The Euro currency had a turbulent ride in the past week, as did most of the other currencies, with central banks all over the world aggressively cutting interest rates and buying bonds. The ECB held their regular meeting last Thursday, and while they expanded the QE program by 120 B euros, they disappointed markets by keeping interest rates unchanged.
The Euro has since then sold off again and finds it difficult to pick a direction in all the uncertainty. In either case, new measures by the authorities can be announced at any moment, and that can have a powerful impact on where the Euro and other currencies will move. Traders should remain vigilant and protect their positions against any adverse moves.
EURUSD Technical Outlook:
EURUSD reached the 1.15 area last week after which it was sharply rejected there and then fell to almost 1.1050. The sharp expansion in Fx volatility has caused large moves in currencies of a degree which traders haven’t seen for years.
The EURUSD pair is now testing the key support area at 1.11 (which was former resistance) – crucial for the newly established uptrend to survive. If the price drops below this support zone and stays there, then further bearish price action will become more likely.
To the upside, 1.12 is the nearest resistance where EURUSD is getting rejected today, while 1.1500 and 1.1800 are the more distant resistance zones.
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