EUR/USD
The euro grew by 107 points on Monday, the highest growth of the day was 160 points. Euro purchases were at their highest daily volumes in the last 13 months. Such a rush is possible on only one idea - to be certain that the Fed will lower the rate by 0.5% in March. We are still not sure about this. The Fed may be proactive, but only if there are signs of economic failure, they are not there yet. The stock market crash of 12.75% between February 20 and 28 is far from a sign of economic drawdown; on the contrary, it is useful for the economy with the goal of reorganizing it from plankton - various firms that tighten business chains. Pension funds, insurance companies, regional budgets can be hit, all those who, by law, are obliged to place reserves in financial markets. But here, large investors withdrew money from the stock market throughout the past year, transferring funds to less risky instruments. Indeed, the yield on 10-year US bonds last year steadily declined, under the influence of debt purchases, the yield fell from 1.921% to the current 1.145%. Last year, the main buyers of US Treasury bonds were domestic investors. For a one-time reduction of the base rate by 0.5%, there must be a very good reason, for example, the bankruptcy of a large bank. Over the past week, the euro has grown by 350 points and this is enough to absorb one rate cut by 0.25%.
The euro reached the target level of 1.1175, the Marlin oscillator entered the overbought zone and showed the first sign of a reversal. Now we are waiting for, if not a price reversal down, then a correction, the purpose of which will be to support the MACD line at 1.1035.
The signal line of the Marlin oscillator returned to the consolidation range on the four-hour chart, there are no other signs of a reversal. It remains to wait.
The Reserve Bank of Australia makes a decision on the rate today at 2:30 London time. A decrease is expected from 0.75% to 0.50%. If the euro's reaction to this decrease is negative, that is, there will be no price increase, then this will become an indirect sign of the completion of the expected reduction in the rate and the Fed itself.
The material has been provided by InstaForex Company - www.instaforex.com