09-Apr-2020

1) EUR/NZD: The Bear Is On Its Way
2) All Eyes on OPEC+ Decision, As Fed Stands Ready To Cut More
3) EUR/USD Came Under Some Fresh Selling Pressure on Wednesday
4) Dollar Ends Flat As Gains in U.S. Stocks Keep Upside in Check

1) EUR/NZD: The Bear Is On Its Way

EUR/NZD has been bearish on the daily chart. The pair produced a bearish engulfing candle yesterday. The day before yesterday’s candle came out as a bullish corrective candle. Thus, the daily sellers may go short in the pair below yesterday’s lowest low. The H4 and the H1 chart look good for the sellers as well.

The daily (D1) chart shows that the price has been heading towards the South. The day before yesterday’s candle came out as a bullish pin bar. However, yesterday’s candle engulfed the pin bar, which sets a strong bearish tone in the daily chart. The daily sellers may go short in the pair below 1.80125. The price may find its next support around 1.76760.

The H4 chart shows that the price made bullish correction after making a bearish move. At the last bearish wave, the price had a bounce at 1.80630 and had a bullish correction. The level of 1.82920 has worked as a level of resistance, driving the price towards the downside. The price has been roaming around the last swing low, may generate a bearish momentum below yesterday’s lowest low, and it may find its next support around 1.75885. If the support level produces a bullish momentum and makes a breakout at the resistance, on the other hand, the price may rather get choppy instead of being very bullish.

The H1 chart looks excellent for the sellers. The price made a strong bearish move and had a bounce at 1.80280. It headed towards the North and found its resistance at 1.80980, where the price reacted earlier. A flipped level of support/resistance attracts more traders if it produces a bullish/bearish reversal candle. It has already produced a bearish engulfing candle. If the price heads towards the South and makes a breakout at 1.80280, the sellers may go short in the pair and drive the price towards the downside with good selling pressure. The price may find its support at 1.77500. Since the H4 and the daily chart are bearish biased, thus the sellers may take partial profit and hold the rest of the positions to grab more pips.

2) All Eyes on OPEC+ Decision, As Fed Stands Ready To Cut More

Equities in the New York gained another 3% on Wednesday with the Federal Reserve (Fed) meeting minutes showing that the bank is ready for a ‘forceful response’ amid ‘all participants viewed the near-term US economic outlook as having deteriorated sharply in recent weeks and having become profoundly uncertain’. The Fed, that has extended its monetary support to unprecedented levels for bond and credit markets, may pull out more of its magic hat such as additional measures to support the credit flow to households and small businesses. Meanwhile news of more job cuts creep in. This time, Japanese large carmakers said they consider stopping paying thousands of people employed by temporary agencies, which should add up to the skyrocketing jobless numbers in April. Today’s US jobless claims data could confirm a rise of above 5 million last week, following an almost 10 million increase over the past two weeks. Else, the University of Michigan’s is expected to fall to 75 in April, from 89. 1 printed a month ago.

Given the fast deteriorating economic tissue, there are talks in the US and Europe for start releasing some containment measures despite an unexpected rise in the number of new cases following a decline earlier this week. The broad lockdown is taking a heavy toll on economies and lead to heated conversations among policymakers who seem increasingly impatient to see the economic activity getting back to a normal pace. Alas, the time will show if releasing containment measures too early is the right decision, with the risk of prolonging the pandemic and its economic impact in time and in space.

According to a top German research institute, the German economy may slow by a record 9.8% in the second quarter and Europe’s growth engine could print a 4.2% contraction this year. The sputtering German economy will certainly weigh on the entire European sentiment, but there is not many governments can do other than loosening their purses’ strings. The European Central Bank (ECB) will continue giving its full support to the market by massive government debt purchases. So, in the short run, all seems settled from a market point of view, but higher government spending will end up being a serious headache among the EU nations in the medium to long run. For now, the euro remains a touch below the 1.09 mark. Due today, the Italian industrial production data could confirm a 1.7% m-o-m contraction in February and cap the single currency’s upside potential sub-1.10.

Across the Channel, pound traders will be watching a series of important economic data before leaving for Easter break. The manufacturing and industrial production may show a slight improvement in February, as a result of an economic improvement at the start of the year. The GDP may have improved to 0.1% m-o-m from 0.0% printed a month earlier. But investors know that the data will show a drastic downturn in March, and the numbers will likely get worse in April, before starting to get better toward the end of the second quarter. Hence, an encouraging data set could hardly improve the investor appetite. The sentiment in British stock markets will likely depend on the outcome of the OPEC+ meeting – which could potentially be a historical cut in joint production, and the market’s reaction to the decision.

Activity in FTSE futures (+0.95%) suggests some optimism at the open, but this could change rapidly.

Pricing in the oil markets suggest that a cut of 10 to 15 million barrel per day may not satiate investors’ hunger and fail to trigger the desired sustainable recovery in oil prices. WTI crude hovers around the $25 a barrel, slightly better bid relative to recent days. But if today’s decision cannot create the spark that oil producers wish for, then we can see the price of a barrel retreat back to the $20 level in the coming sessions. Intermediate support is eyed at $23 bp.

3) EUR/USD Came Under Some Fresh Selling Pressure on Wednesday

The EUR/USD pair came under some fresh selling pressure on Wednesday, eroding a part of the previous day’s goodish intraday positive move and was being weighed down by a combination of factors. The US dollar was back in demand through the first half of the day amid disappointing news surrounding the coronavirus pandemic. Meanwhile, the European Union (EU) Finance Ministers failed to reach an agreement on coordinated coronavirus economic response and undermined the shared currency. The common currency was further pressured after a group of five leading economic institutions in Germany forecasted a severe recession, with a contraction of 9.8% in the second quarter of 2020.

The pair touched an intraday low level of 1.0830, albeit managed to find some support at lower levels as the greenback struggled to preserve its early gains. Investors largely ignored the latest update, which showed that New York State recorded its highest death toll on Wednesday, rather turned optimistic on forecasts that the pandemic peak could come soon. This was evident from a strong rally in the US equity markets and dented the USD’s safe-haven status. The release of the FOMC minutes did little to influence the USD price dynamics or provide any meaningful impetus to the major. The pair, however, failed to capitalize on some renewed weakness and ended in the red, marking its seventh day of a negative move in the previous eight.

Given that the EU finance ministers are expected to meet again this Thursday, the pair held steady and was seen oscillating in a narrow trading band through the Asian session. Later during the early North-American session, attention will shift to the US economic docket, which highlights the release of US initial weekly jobless claims. This along with March PPI figures might influence the USD price dynamics and provide some impetus. Apart from this, fresh developments surrounding the coronavirus saga will further contribute towards producing some meaningful trading opportunities.

From a technical perspective, nothing seems to have changed much for the pair and the near-term set-up remains tilted in favour of bearish trades. However, it will be prudent to wait for a sustained weakness below the 1.0775-70 regions before positioning for any further near-term depreciating move. Below the mentioned support, the pair is likely to accelerate the fall towards challenging the 1.0700 round-figure mark before eventually dropping to test YTD lows, around the 1.0635 area.

On the flip side, the 1.0900 round-figure mark might continue to act as an immediate resistance, above which a bout of a short-covering move has the potential to lift the pair further towards 50-day SMA, around the 1.0970-75 regions. The momentum could further get extended towards the key 1.10 psychological mark en-route the very important 200-day SMA, around the 1.1060-65 region.

4) Dollar Ends Flat As Gains in U.S. Stocks Keep Upside in Check

The greenback pared intra-day gains made in Asia and Europe and ended largely flat on Wednesday due to uncertainty whether the coronavirus pandemic may soon peak or not. Market is awaiting release of U.S. initial weekly jobless claims due out Thursday to guauge damage to the U.S. economy in the wake of COVID-19 pandemic. The single currency fell across the board after European Union Finance Ministers failed to agree on virus rescue package.

Versus the Japanese yen, although dollar initially fell to session lows of 108.51 at Asian open on cross-buying in jpy, price erased its losses and gained to 109.00 on recovery in U.S. Treasury yields. The pair later ratcheted higher to intra-day high of 109.09 in New York morning but only to fall back to 108.61 on renewed usd’s weakness, price last traded at 108.81 near the close.

The single currency retreated from 1.0902 in Australia to 1.0860 in Asia on cross-selling in euro. Despite recovering to 1.0887, the pair then briefly dropped to session lows of 1.0831 at European open after EU Finance Ministers failed to reach a deal over a coronaviurs aid package. However, price then rebounded in tandem with sterling to 1.0888 in New York morning but only to move back to 1.0851 on cross-selling in euro.

Reuters reported the chairman of euro zone finance ministers Mario Centeno said on Wednesday he was suspending talks on half a trillion euro package to support the economy against the coronavirus epidemic until Thursday, to bridge divisions over its elements.

“We came close to a deal but we are not there yet,” Centeno said on Twitter after 16 hours of talks with numerous breaks, resumptions and bilateral discussions brought no breakthrough.     “I suspended the Eurogroup and continue tomorrow, Thursday,” he said.     Officials said the deadlock was caused by a feud between Italy and the Netherlands over conditions attached to euro zone credit for governments to fight the coronavirus epidemic.

The British pound went through a hectic trading session. Cable met renewed selling at 1.2352 in Australia and fell to 1.2311 in Asia before rebounding to 1.2342 but only to drop in tandem with euro to 1.2289 at European open. However, the pair then erased its losses and rose to 1.2395 in New York morning on usd’s weakness. Price then ratcheted higher to session highs of 1.2419 before retreating on profit-taking.