17-Mar-2020

1) USD/CAD: the Bull’s Run Continues
2) The FED Fails to Calm Markets Down
3) EUR/USD Pressured Around 1.1150 amid USD Strength, Ahead Of ZEW
4) GBP/USD Under Pressure Below 1.2300, Eyes On UK Jobs

 

 

1) USD/CAD: the Bull’s Run Continues

USD/CAD has been bullish on the daily chart. The chart produced a bullish engulfing candle yesterday. Thus, the buyers may want to go long above yesterday’s highest high and push the price towards the North further. The H4 and the H1 chart suggest that the price has been on consolidation. A flipped level may hold the price as a level of support and attract the buyers to go long on the pair too.

The daily chart shows that the price has been bullish for a long time. It had a bullish gap and continued its journey towards the North. Yesterday’s candle came out as a bullish engulfing candle closing well above Friday’s candle. It is a strong bullish price action as far as the candlestick pattern is concerned. The buyers on the daily chart may go long above the level of 1.40220. On the other hand, the sellers must wait for the daily chart to produce a bearish reversal. It seems it is not happening soon.

The H4 chart shows that the price made a bullish breakout at the level of 1.39470. The price has been on consolidation. The level of 1.40165 has been working as a level of resistance. The level of 1.39470 may work as a level of support. If the level produces a bullish reversal candle and the price makes a breakout at the level of 1.40165, the price may head towards the level of 1.42900. On the contrary, if the price makes a bearish breakout at the level of 1.39470, it may head towards the level of 1.38100.

After being bullish for a while, USD/CAD had a rejection at the level of 1.40165. It has been heading towards the South at a slow pace. The level of 1.39470 may come into play and work as a level of support. If the level produces a bullish reversal candle, the buyers may trigger a long entry above the level of 1.40165. The price may find its next resistance at the level of 1.41600. Since it is a daily and an H4 resistance as well, the H1 traders may consider holding a portion of trade and ride on the potential trend to grab more pips. In case of a bearish breakout, the price may find its support at the level of 1.37940.

The daily, the H4, and the H1 chart look good for the buyers. Thus, the pair may end up having another bullish day today.

 

2) The FED Fails to Calm Markets Down

After the second emergency rate cut of the US Federal Reserve markets did NOT react in a positive way.

This time instead, all three of the big US indexes, the S&P 500, the Dow Jones and the Nasdaq, fell to new lowest levels intensifying the crash situation.

Earlier in the day China reported catastrophic figures for both Retail Sales and Industrial Production and by now Goldman Sachs cut its Q1 China GDP estimate to -9% from previously +2.5% which impacted risk-correlated currencies such as the AUD or NZD heavily and pushed them down to multi-year lows.

The CAD was also sent lower by yet another rate cut of the Bank of Canada while oil prices dropping below the $30 added to the pressure of the Loonie to the downside.

A looming banking crisis in Australia and Canada and the first credit downgrades for big companies like Boeing or Exxon add to the severity of the situation.

Even Gold and Bitcoin both saw massive drops yesterday and while they recovered a little overnight, the charts continue to paint a picture of panic all around.

Governments around the world are scrambling for solutions which need to come in a fiscal instead of a monetary policy form many experts believe.

 

3) EUR/USD Pressured Around 1.1150 amid USD Strength, Ahead Of ZEW

EUR/USD is trading around 1.1150, pressured as the dollar remains dominant amid the coronavirus crisis. French President Macron declared “war” and pledged stimulus. The German ZEW Economic Sentiment is awaited.

Euro/dollar is trading around the 100 Simple Moving Average on the four-hour chart, above the 200 SMA and below the 50 SMA. Momentum is to the downside while the Relative Strength Index is balanced. All in all, bears are in the lead.

Support awaits at 1.11, which provided support in early March. It is followed by 1.1050, a stubborn support line from last week. The next lines are 1.0950 and 1.0875.

Resistance is at 1.1240, a swing high on Monday which is backed up by the 200 SMA. It is followed by 1.1320 and 1.1360, both stepping stones on the way down. 1.1410 and 1.1495 are next.

“We are at war” – said French President Emmanuel Macron, when he presented new restrictions in an attempt to the coronavirus outbreak, while President Donald Trump also warned of a recession. EUR/USD is holding onto its range – in a typical “dead cat bounce” move – but that may change.

France is shutting down Tuesday on at midday. Non-essential activities are being prohibited – to various degrees – across the old continent, with Germany closing bars, theaters, and museums, and Spain requisitioning the private health system. Italy, the epicenter of the European outbreak, continues recording hundreds of deaths on a daily basis. Several countries are also closing borders, with the EU recommending restricting entries and exits from the EU.

These steps already have an economic impact on airlines asking for government help and car factories shutting down in several places. Moreover, many firms state they are unable to provide forecasts.

The upside is that European countries are moving towards injecting fiscal stimulus, with France leading the way. Macron offered a broad €300 billion package to support businesses and announced the waiving of utility bills during the emergency period.

Governments are backed by the European Central Bank, with President Christine Lagarde vowing support. Will additional countries, most importantly Germany, join France? Massive spending from governments may boost the euro, but so far, Europe is moving relatively slowly.

The German ZEW Economic Sentiment for March may shed some light on how European businesses see the current situation.

 

4) GBP/USD Under Pressure Below 1.2300, Eyes On UK Jobs

GBP/USD trades close to 1.22, at the lowest since October 2019. BCC anticipates the slowest UK GDP growth since GFC. Focus on UK jobs data ahead of PM Johnson’s “significant coronavirus economic package”.

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 traders. Moreover, the pair’s inability to register any meaningful recovery further suggests that the near-term selling pressure might still be far from being over. A convincing break through the 1.2200 mark will add credence to the bearish outlook and set the stage for additional declines towards the 1.2140-30 horizontal support. The downward momentum could further get extended towards testing sub-1.2100 levels before the pair eventually falls towards challenging the 1.20 mark.

On the flip side, any attempted recovery now seems to confront some fresh supply near the 1.2300 round-figure mark, above which the positive move could get extended towards the 1.2350-60 supply zone. A sustained strength above the mentioned barriers might trigger some near-term short-covering move and lift the pair beyond the 1.2400 mark, back towards the overnight swing high near the 1.2420-25 regions. Some follow-through buying might assist bullish traders to aim towards reclaiming the key 1.2500 psychological mark.

The GBP/USD pair had some good two-way price swings on Monday and finally settled nearly unchanged for the day, forming a Doji candlestick pattern on the daily chart. The Fed’s emergency decision to slash interest rates to zero and introduce a massive bond-buying program to offset any negative impact from the coronavirus pandemic exerted some heavy downward pressure on the US dollar. This eventually provided some initial boost and assisted the pair to gain some positive traction on the first day of a new trading week.

The intraday uptick to levels beyond the 1.2400 round-figure mark lacked any strong follow-through, rather attracted some intraday selling pressure. The UK government’s controversial measures of fighting the coronavirus pandemic turned out to be one of the key factors that weighed on the GBP and kept a lid on the early uptick. This coupled with a fresh round selloff across the global equity markets extended some support to the greenback’s status as the global reserve currency and further contributed to the pair’s intraday pullback.

The pair tumbled to fresh five-month lows but managed to find some support near the 1.2200 round-figure mark. The pair failed to capitalize on the overnight rebound of around 70 pips and met with some fresh supply during the Asian session on Tuesday. Market participants now look forward to the release of UK employment report for some impetus. Later during the early North-American session, the US monthly retail sales data might further contribute towards producing some meaningful trading opportunities.

The key focus, however, will remain on developments surrounding the coronavirus saga, which might continue to play a key role in influencing the broader market risk sentiment and infuse some volatility across the FX market.