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US announces unprecedented measures to support the economy and the population (we expect AUD/USD and NZD/USD pairs to continue

The market is discussing the Fed's announcement of unprecedented measures and the US Treasury Department to support the US economy, as well as consumer demand amid an impending recession.

It can be recalled that earlier, following the results of an extraordinary meeting of the Fed this Sunday, it was decided to cut the key interest rate to zero, as well as to expand incentive measures in the form of quantitative easing in the amount of $ 700 billion. And on Tuesday, US Treasury Secretary S. Mnuchin proposed a new fiscal stimulus package for more than $ 1 trillion, and D. Trump – support for working Americans with financial problems in the amount of $ 1,000. Of course, all these proposals will first have to pass approval in Congress, where the Democratic Party has the majority. But if they are implemented, this will be not only a big advantage in the election campaign of Trump for the second presidential term, but also a strong factor that keeps the American economy on the border of the recession abyss.

Now, let's move back to the financial market. While stock markets are experiencing severe turbulence, and volatility is at the crisis levels of 2008-09, the US dollar is still confidently holding its positions in the currency exchange market. The ICE dollar index is at the local maximum a month ago, trying to overcome the level of 100 points. Such dynamics, as we previously argued, is shaped precisely by the attractiveness of the US dollar as a safe haven in catastrophic situations of both economic and political nature.

The persistence of such a situation on the market, and it is still supported by the factor of the spread of coronavirus on the planet, will support the demand for dollars. On the other hand, investors will get rid of any assets, just to go into cash. In this situation, we believe that the dollar in the short-term will remain strong against major currencies - to the euro, pound, Canadian, New Zealand and Australian dollars. However, its growth will be restrained by traditional protective currencies - the yen and the Swiss franc.

Meanwhile, currencies of countries with developing economies will definitely remain under pressure against the dollar. A separate line is commodity currencies. The already mentioned Canadian, New Zealand and Australian dollars will decline in the wake of a decline in demand for commodity and commodity assets, as well as expectations of a softening of the Central Bank's monetary policies that mimic them.

If the situation worsens, the regulator may go on raising interest rates, but for now, he holds a pause in the hope that the pressure of the effects of coronavirus on the world economy will weaken in the next month or two, especially since the Chinese economy begins after the peak of this scourge in the country and the level drops sick people gradually restore business and economic activity.

Forecast of the day:

AUD/USD is trading above the level of 0.5960. We consider it possible to resume sales of the pair after crossing this level with a local target of 0.5785.

NZD/USD pair is above the level of 0.5915. A price decline below may serve as a basis for a decline to the level of 0.5785.

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The material has been provided by InstaForex Company - www.instaforex.com