29.03.202011:07 Pregled Forex analiza: EUR/USD. Results of the week. United States came first in the world in terms of the number of people infected with the coronavirus

4-hour timeframe

Exchange Rates 29.03.2020 analysis

If you look at the chart of the movement of the EUR/USD pair for the period from February 20 to today, and compare it with almost any period before February 20, you can clearly understand what panic is. In principle, markets continue to remain in this state, as volatility remains not just high, but very high, traders still ignore most of the macroeconomic statistics, and trading decisions are made based on their conclusions and reasoning, which often do not correspond to facts and logic. For example, the US dollar is getting much cheaper. In total, the euro has risen in price by 500 points over the past six days. Is there any reason for this? Some might say: in the United States, the government has decided on an unprecedented package of assistance to the economy; stock markets have collapsed by 30% over the past month; oil has fallen to multi-year lows; and the number of people infected with the COVID-2019 virus has come to the top in the world. However, when the US dollar was actively rising in price six days ago, the situation was approximately the same.

The US stock market has already fallen by 30%, oil prices have already fallen to lows, there were already quite a large number of infected people in America, the Federal Reserve has already lowered the rate to zero and resumed the quantitative stimulus program. Thus, we can say that there were no reasons for the dollar to firmly grow. Simply, traders believed that the American economy would remain "on the horse" in any case, and the US dollar would remain forever. But as practice shows, the situation in the United States is now the same as around the world, and maybe even worse. The eternal American essence of "living in debt" can turn the country into a new debt crisis and collapse of the entire financial system. After all, all companies and businesses, and even ordinary Americans are closely connected to each other through loans. Therefore, when one sector of the economy falls, all the others start to fall as well. Thus, it seems that market participants realized about a week ago that everything is also bad in the United States and began to get rid of the dollar. That's all the logic of the currency market over the past month and a half.

Unfortunately, the coronavirus epidemic is still the main topic for the whole world. The COVID-2019 virus, although not a disease with a high mortality rate (no more than 5%), nevertheless, has an amazing survivability and a high degree of transmission. In fact, any quarantine measures are designed to slow down the spread of the virus, not completely stop it. In order to completely stop the spread, measures are needed approximately, as in China or South Korea. In other words, infected areas should be completely isolated without any exceptions. No one should be able to enter or leave. However, in democratic and liberal states and the European Union, this is nearly impossible. People will still move around cities and between regions. That is, the virus will spread almost in any case, the only question is how fast. For example, there are already 92,000 infected people in Italy, despite the fact that the country has long been under strict quarantine. But, as we can see, the doctors were right when they said that the number of infected people may already be much higher than officially stated. The problem is that the coronavirus can have a long incubation period, or it can pass in individual people without symptoms at all. At the same time, the infected person still continues to transmit the virus to other people, even if he does not feel any discomfort. Thus, if about 665,000 cases are officially reported worldwide, the real numbers are likely to be 3-5 times higher...

Last week, there were quite a lot of interesting fundamental events. However, unfortunately, it is impossible to say with certainty that any of them had an impact on the foreign exchange market. We would like to celebrate two events, both in the United States. First, the US Congress encouraged the decision to provide a 2-trillion package of assistance to the economy. This suggests that the American economy needs this help, and that the market will receive another 2 trillion in cash, and the US government's debt will grow by another two trillion dollars. Second, the report on applications for unemployment benefits, which showed an increase of 3.3 million. And it is unemployment that now causes the greatest concern in every country in the world. It is unemployment that can bury the economy. If people don't work, the economy doesn't work. And the economy is not a thing that can be put on pause, and when the epidemic is defeated, just resume its work. The economy will shrink and fall. Yet it is still possible to stimulate and to slow down the pace of the fall, but at a certain point, no monetary incentives will not have a positive effect.

Recommendations for long positions:

The euro/dollar has consolidated above the critical Kijun-sen line on the 24-hour timeframe. Thus, longs are now relevant with the goal of resistance level of 1.1282. However, it should be remembered that the market remains in a state of panic, which means that a downward turn can occur at any time.

Recommendations for short positions:

Euro-currency sales with a target support level of 1.0838 can be considered no earlier than closing quotes under the Senkou Span B and Kijun-sen lines.

*Analiza tržišta koja se ovde nalazi namenjena je boljem razumevanju tržišta i ne pruža instrukcije za vršenje trgovanja.

Paolo Greco,
Analitickog eksperta
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