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4-hour timeframe

Exchange Rates 25.03.2020 analysis

Average volatility over the past five days: 223p (high).

The EUR/USD currency pair ends the third trading day of the week with the same corrective movement within which it has been in since March 19. Despite the visual weakness of the correction, the pair consistently passes at least 150-200 points a day. And it "only" passed 90 today, March 25th, but this is at the moment, there could be more by the end of the day. We frankly rejoice at the fact that the volatility of the euro/dollar pair began to decline. Despite the fact that the coronavirus continues to spread very rapidly across the planet, we are primarily interested in the foreign exchange market, the trend in it and the reaction of traders to certain events. In recent weeks, there was no justified reaction to any events. We associate this phenomenon with high volatility, which is the first sign of panic. If volatility begins to decline, then most traders begin to bounce back, calm down and get used to new realities. Accordingly, in the near future we can expect the markets to return to normal, although it may take years before, for example, the stock markets of the EU, Britain and the United States fully recover.

Meanwhile, the total number of cases of coronavirus worldwide is 438,000, according to official data. These are only officially recorded cases of the disease. There are almost 70,000 infected in Italy and 55,000 in the United States. The world Health Organization (WHO) notes that over the past day, the largest number of new infections occurred in the EU and the United States. The US accounts for about 40% of all new diseases. There is a strong acceleration in the number of infected citizens in the US. At the same time, a leading epidemiologist Ira Longini predicted that the peak of deaths in America will occur in about three weeks. According to Longini, when this period of maximum mortality and infection is over, it will be possible to partially lift restrictions on movement among American citizens. At the same time, not everyone believes such forecasts are real. Many scientists say that the figure will be six weeks, during which the number of infected and the number of deaths from the COVID-2019 virus will increase in the United States. And at the same time, the United States again blames China. This time, it is no longer about spreading the virus, but about hiding information about the virus that could stop the spread of the pandemic. "I am concerned that the cover - up and misinformation that the Chinese Communist party is engaged in deprives the entire world of the necessary facts to prevent new cases of coronavirus infection," said US Secretary of State Mike Pompeo. The same opinion is shared by the US President Donald Trump. "If we had learned about all aspects of the disease a few months earlier, the virus could have been contained within the borders of one province(Wuhan)," Trump said.

Meanwhile, there has been a slight decline in the spread of the virus in Italy. However, WHO spokeswoman Margaret Harris said it was too early to celebrate the victory. Firstly, fewer coronavirus tests have been conducted in recent days than previously. Secondly, this may be a mere coincidence. Italy has already caught up with China in the number of deaths from the disease, and in the near future it can be doubled.

4-hour timeframe

Exchange Rates 25.03.2020 analysis

Average volatility over the past five days: 420p (high).

The GBP/USD currency pair was traditionally more active than the euro/dollar pair on March 25. The pair managed to overcome the critical line during the day, and work out the lower boundary of the Ichimoku cloud, the Senkou span a line, and bounce off it, and return back to the Kijun-sen line. Thus, at the moment, we can say that the buy signal from Ichimoku Golden Cross is extremely weak, so long positions can not be considered relevant. Moreover, at the current bar, the price may again return to the area below the critical line,and the MACD indicator may turn down. Volatility remains very strong. The pound/dollar pair has already passed about 330 points during March 25. It is difficult to say whether the downward trend will resume or whether the pound/dollar pair will now switch to a sideways movement for an indefinite period. We have repeatedly said that the British currency has not had a strong and unambiguous reason to fall by 1500 points against the dollar in the past two weeks. You can note the coronavirus epidemic, and the fall in the main stock indexes of the United States and great Britain, and the fall in the oil market, and absolutely draconian measures taken by the Bank of England and the Federal Reserve, and the terrible forecasts of the IMF, Goldman Sachs and Morgan Stanley regarding the prospects for the world economy in 2020. However, all these factors apply to both Britain and the US. Thus, from our point of view, the main reasons for the fall of the pound and the reasons that can trigger the resumption of the downward trend are still panic and the general belief of traders that, whatever happens, the dollar was, is and will exist, and is the most secure currency in the world.

Meanwhile, in the UK, the number of cases of the "Chinese virus" reached 8,000. And again, this is only official statistics. No one knows how many people are sick in the UK. In order to have a complete picture of things on hand, it is necessary that absolutely all residents pass a test for coronavirus, which, for obvious reasons, is impossible. Scientists at Oxford University take this fact into account and believe that more than half of the UK population could already become infected, simply as long as they do not have any symptoms of malaise. According to scientists, only one out of a thousand people who become infected with the coronavirus have such a degree of malaise that makes him go to the hospital. And the vast majority of Britons show either very mild symptoms, or none at all.

Recommendations for EUR/USD:

For short positions:

The euro/dollar continues to have a corrective movement on the 4-hour timeframe. Thus, it is recommended to sell the euro currency if the price consolidates below the Kijun-sen line with a target level of 1.0531 volatility.

For long positions:

Formally, you can buy the EUR/USD pair, as the price crossed the Kijun-sen line, with the first goal at 1.0977. However, we believe that the prospects for the upward movement are now very vague.

Recommendations for GBP/USD:

For short positions:

The pound/dollar pair sharply resumed its downward movement on March 25. Thus, it is recommended to sell the British pound with the goal of a volatility level of 1.1316 after fixing the price below the critical line.

For long positions:

It is recommended to buy the GBP/USD pair in case of a price rebound from the Kijun-sen line with the first goal, the volatility level is 1.2156, but with very small lots. As in the case of the euro currency, it is recommended to remember the increased risks when opening any positions.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicators window.

Support / Resistance Classic Levels:

Red and gray dashed lines with price symbols.

Pivot Level:

Yellow solid line.

Volatility Support / Resistance Levels:

Gray dotted lines without price designations.

Possible price movements:

Red and green arrows.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Performed by Paolo Greco,
Analytical expert
InstaForex Group © 2007-2020
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