The Fed announced the launch of a grand-scale program.
Today's review of the main currency pair of the Forex market will start with the macroeconomic statistics that were published yesterday, and the releases expected on the last day of weekly trading.
Yesterday's data from the US came out mixed. While the producer price index was better than economists' expectations, initial jobless claims rose more than expected. The University of Michigan consumer sentiment index also turned out to be significantly worse than forecast and showed the strongest drop since 2011. All figures and details can be seen in the economic calendar. There were a lot of reports, and I don't think it's appropriate to give all the values.
Today at 13:30 (London time), data on consumer prices will come from the United States. In normal circumstances, this is a very important indicator that determines the degree of inflationary pressure in the country, which, in turn, affects the monetary policy of the Federal Reserve System (FRS). However, as you can see, market participants are simply ignoring important reports from the United States. The main topic continues to be the spread of the COVID-19 epidemic around the world, and in particular in the United States.
Against this background, the Fed decided to launch a grand program in scope. As stated by the Fed Chairman Jerome Powell, the US Central Bank will allocate 2.3 trillion US dollars to support small and medium-sized businesses that are suffering significant losses during the current pandemic.
Powell said that the agency headed by him went on such large-scale lending in order to support economic stability in the country, and the Federal Reserve intends to do everything possible to do this. Of that $ 2.3 trillion, loans will be made to American households, local governments, and businesses to deal with the effects of COVID-19.
The European Central Bank does not sit idly by, although officials at different levels have enough disagreements. However, the ECB has already started buying up the debt of the countries most affected by the coronavirus, primarily Italy. The total amount of debt purchases will be approximately 1.1 trillion euros. It's an impressive amount, isn't it?
However, the actions of the European regulator alone may not be enough to overcome the terrible consequences of the pandemic. Other aid mechanisms must also be involved, and for this to happen, a consensus must be reached between the wealthiest and the poorest countries in the European Union.
At the moment, it seems that the Fed is taking more significant and coordinated measures than their ECB counterparts. Let's see how the euro/dollar currency pair reacted to all this.
Despite the decisive and unprecedented actions of the Federal Reserve, the single European currency strengthened against the US dollar following yesterday's trading. The euro/dollar pair closed yesterday's session slightly above the resistance level of 1.0925, thus making its breakout. However, we can make a more convincing assessment of this after the end of today and weekly trading.
At the moment, the situation is such that with a high probability, we can assume a further rise in the rate to the area of 1.0970-1.1005. I fully assume that here the quote will meet strong resistance and turn down. At the same time, it is difficult to assume whether this will be a corrective pullback or a reversal to continue the main downward trend.
You can see for yourself what the picture is on the hourly chart. With great difficulty and no less persistence of the bulls in the euro, the pair passed up the red resistance line of 1.1484-1.1443, as well as the mark of 1.0925.
For those who want to open new positions today, I will give priority to purchases that are better to open after rollbacks to the price zone of 1.0930-1.0890. It is more aggressive and risky to try buying near the current price of 1.0942.
Sales, as already noted, should be considered after the rise to the area of 1.0970-1.1005. However, it is better to think about opening short positions on Monday. At least it's safer that way. It is unknown what may happen in the coming weekend and how the auction will open on the night from Sunday to Monday.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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