31-Mar-2020

1) GBP/USD Dips below 1.23 amid Dollar Strength, Mixed Figures
2) EUR/USD Pressured Around 1.10 As Coronavirus Dominates Markets
3) Gold Price Analysis: Range Play Continues, Focus on Bollinger Bands

1) GBP/USD Dips below 1.23 amid Dollar Strength, Mixed Figures

GBP/USD has dipped below 1.23, as the dollar snaps back after falling in previous days. UK GDP was confirmed at 0% in Q4 2019 while the current account deficit is narrower than expected. Coronavirus statistics are awaited.

From a technical perspective, the pair’s overnight pullback from the vicinity of the 61.8% Fibonacci level of the .3200-1.1412 steep decline showed some resilience below 50% Fibo. level. Hence, it will be prudent to wait for a sustained weakness below the Asian session swing lows before positioning for any further near-term depreciating move. Below the mentioned support, the pair is likely to accelerate the slide further towards testing sub-1.2100 levels (38.2% Fibo.) with some intermediate support near the 1.2200 round-figure mark.

On the flip side, the 1.2400-1.2410 region now seems to have emerged as an immediate resistance, which if cleared decisively should assist the pair to make a fresh attempt towards conquering the key 1.2500 psychological mark (61.8% Fibo.). Some follow-through buying now seems to pave the way for an extension of the recent recovery move from 35-year lows. The pair then might accelerate the momentum further towards the 1.2600 round-figure mark ahead of the 1.2625 supply zone and the very important 200-day SMA, around the 1.2675 region.

The GBP/USD pair traded with a mild negative bias on the first day of a new trading week and was being weighed down by a combination of factors. The British pound was pressurized by the fact that Fitch lowered its UK long-term issuer default ratings to AA- from AA, citing the weakening of UK’s public finances amid COVID-19 crisis and the uncertainty about the post-Brexit trade relationship with the EU.

On the other hand, the US dollar stalled its week-long bearish trend, rather gained some positive traction and contributed to the pair’s downtick. The ever-increasing number of confirmed coronavirus cases across the world continued fueling concerns over an imminent global recession. This coupled with the optimism over a massive $2.2 trillion US economic stimulus package extended some support to the greenback.

The pair snapped four consecutive days of a winning streak, albeit lacked any strong follow-through and recovered around 100 pips from daily swing lows. The pair, however, failed to capitalize on the overnight bounce and witnessed some aggressive selling during the Asian session on Tuesday. Growing concerns over the economic fallout from the coronavirus pandemic provided a goodish lift to the greenback’s perceived safe-haven status and turned out to be one of the key factors weighing on the major.

The pair tumbled to an intraday low level of 1.2245 but once again showed some resilience at lower levels and quickly recovered back above mid-1.2300s. Meanwhile, the latest UK macro data, confirming that the economic growth remained flat during the final quarter of 2019, did little to provide any meaningful impetus to the major. Later during the early North-American session, the US economic docket – featuring the release of Chicago PMI and Conference Board’s Consumer Confidence index – will now be looked upon for some meaningful trading opportunities.

2) EUR/USD Pressured Around 1.10 As Coronavirus Dominates Markets

EUR/USD is on the back foot, trading around 1.10 amid a mixed market mood on the last day of a volatile quarter. Eurozone inflation figures, US consumer confidence, and coronavirus headlines are eyed.

EUR/USD has been setting higher highs and higher lows, with the recent trough of 1.0980 beating the previous one at around 1.0950. The currency pair is benefiting from upside momentum on the four-hour chart and trades above the 50 and 200 Simple Moving Averages.

Resistance awaits at 1.1090, which was a stepping stone on the way up in recent days. It is followed by 1.1150, the cycle high. Next, 1.1240 and 1.1360 await the pair.

Support is at the swing low of 1.0950, followed by 1.0890, which was a temporary resistance line on the way up. Next, 1.0835 held EUR/USD down earlier this month. The next levels to watch are 1.0750 and 1.0640.

It isn’t over until the fat lady sings – Opera houses in Italy and elsewhere are out of work, but EUR/USD is set for s crescendo as a turbulent month and quarter draw to an end.

There are several reasons to believe the dollar ends the quarter on a high note even though the general picture remains dark.

The US dollar had its best quarter since 2016, rising on distressed demand for cash amid the coronavirus crisis. While EUR/USD is significantly off the lows seen two weeks ago, it may have more room to the upside as money managers adjust their portfolios.

Significant swings are likely toward the end of the European session.

China, the world’s second-largest economy – and where coronavirus began – is showing signs of recovery. Apart from reporting only few Covid-19 cases, its Purchasing Managers’ Indexes for March have returned to growth. Both the manufacturing and services PMIs topped 50 points, signaling expansion and beating expectations.

The data may improve the market mood and weigh on the safe-haven US dollar.

While both Spain and Italy have a high number of coronavirus deaths, both troubled countries have seen some optimistic figures. Spain’s number of patients at intensive care units has stabilized while Italy’s new infections have dropped substantially.

Spain has recently tightened its lockdown and Italy and is on course to extend restrictions beyond April 3. Nevertheless, both troubled countries are showing the path forward for the rest in managing to curb the disease.

Further reports from both countries will be eyed during the day.

While the number of cases continues rising rapidly in the world’s largest economy, lawmakers are not laying on their laurels after approving a $2.2 trillion stimulus bill. According to reports, House Speaker Nancy Pelosi is working on a new plan. That would be positive for the economy.

Similar to the data from Beijing, hope for more help could boost sentiment.

Sentiment among consumers will be tested later in the day. The Conference Board’s Consumer Confidence measure for March is projected to drop from the highs around 130 points.

3) Gold Price Analysis: Range Play Continues, Focus on Bollinger Bands

Gold’s sideways churn in the range of $1,630 to $1,610 continues for the third day. With the decline in the price volatility, the Bollinger bands have narrowed.

Bollinger bands are volatility indicators placed two standard deviations above and below the price’s 20-day moving average. A low-volatility period often paves the way for a big move on either side.

The focus, therefore, is on the upper and lower bands currently located at $$1,626 and $1,612, respectively. An hourly close above the upper band would imply a range breakout and open the doors to a test of recent highs above $1,640. Alternatively, a range breakdown would expose the support at $1,594.

The latter looks likely as the 4-hour chart relative strength index is reporting a bearish divergence. Also, the dollar index, which tracks the value of the US dollar against majors, is flashing green near99.38, having bounced up from 98.30 on Monday.