24-hour timeframe
Another trading week on the Forex market has ended, and we are summarizing its results. I just want to note that the whole week was held under the auspices of the celebration of Easter. First in the Catholic style, and then in the Christian style. Thus, it is possible that the volatility of the currency pair would be higher if it were not for the half-day Monday. And on the other days, we can not say that the euro/dollar pair broke records of activity. On the one hand, this may be due to the fact that the markets continue to calm down, and their activity falls accordingly. On the other hand, this week, there was quite a lot of interesting information and macroeconomic reports that deserve attention. Traders, as always, ignored most of them.
As usual, most of the fundamental news came from overseas, and the main news-maker was American President Donald Trump. At the beginning of the week, he said that he could stop funding WHO, and by the end of the week, he stopped it. The reason is simple – the US leader thought that the World Health Organization was spending too much American money on China. Trump's displeasure also concerned the high number of cases from the COVID-2019 epidemic in the United States and extremely low in China. Moreover, it's even difficult for us to say why Trump was more upset. However, WHO has become a "scapegoat", Donald Trump accused it of "a complete failure of the fight against coronavirus" and stopped its funding. At the same time, Trump set out to begin easing quarantine measures in the United States in early May. Even if the epidemic continues to rage, Trump will begin to "open" the states that are least affected by the epidemic. According to the US leader, such a strong and "best in the world" economy as the American one cannot afford to stand idle for a long time. This is the official version. Unofficial – Trump is losing trumps before the presidential election in November 2020, as the labor market has collapsed, unemployment rates are moving from 50-year lows to 90-year highs, and the economy has gone the opposite way to three-year growth in 2 months. I wonder what will happen if the second wave of the epidemic breaks out in the United States "thanks" to the opening of the economy? Who will blame Trump then? Although it is safe to say that "guilty" will be found.
In the middle of the trading week, ECB Vice-President Luis de Guindos spoke, who said that it is the Eurozone that can suffer more than the rest of the world. According to de Guindos, only in the first quarter of 2020, the German economy will lose about 10%, and France - about 6%. However, as we can see, the Chinese economy lost 10% in the reporting period, so the Eurozone does not yet look the worst affected. The ECB Vice-President also said that at least 1.5 trillion euro will be needed to help the European economy. In principle, both the EU and the United States are on the path of injecting multi-trillion tranches into their economies.
Also in the middle of the week, it became known about a very high reduction in US macroeconomic indicators as a result of the global pandemic crisis. And we are no longer talking about the labor market or unemployment, we are talking about industrial production and retail sales. The first indicator decreased by 8.7%, the second - by 5.5%. From our point of view, this is not such a big loss if you compare them with the Chinese. However, we should not forget that China has already overcome the pandemic and is beginning to recover. But in the United States, the epidemic is in full swing, which means that in April, the statistics may be no better.
The removal of quarantine measures was also announced this week by the head of the European Commission, Ursula von der Leyen. However, unlike Donald Trump, she does not need to be re-elected in November. Heiko von der Leyen has only recently taken up her position, so there is no need for her to rush anywhere. And the European plan to get out of quarantine looks wiser. The European Commission has compiled a list of recommendations for all EU member states, according to which the human lives and health of Europeans are put first. According to this list, any relaxation of the quarantine should be carefully analyzed, and the removal of the quarantine should take place in stages, always taking into account the possibility of the health system. The opening of internal and external borders in the European Union will be the last thing to happen. This is the main difference from Trump's plan, which wants to "make America accessible to the whole world and faster."
On Thursday, it became known that the number of Americans who lost their jobs in 4 weeks was almost 22 million. We have already said that this is a huge figure, and this is only for the first month of a severe epidemic in the United States. Given the fact that the number of infected people in America continues to grow and is already 700,000, there is every reason to assume that the number of unemployed people will increase. In any case, next week, we will find out whether the growth rate of job losses by Americans will continue or will even begin to slow down?
The International Monetary Fund also "pleased" on Thursday by publishing a document outlining its vision of what is happening in the world. According to this document, the world economy will not reach $ 9 trillion in 2020, which corresponds to 3% of world GDP. And the greatest losses are predicted for the United States and the European Union. 2020, according to IMF experts, will be the most disastrous since the Great Depression in the United States at the beginning of the last century. A comparison of the "coronavirus" crisis and the "mortgage" crisis is also provided. According to experts, the second crisis on the background of the first is not even a crisis. In 2008, the world economy lost just 0.08%. Moreover, the current negative forecast is based on the fact that in the first half of the year, "coronavirus" will be overcome (although not get rid of it forever) and in the second quarter, the economies of developed countries will begin to recover. However, according to representatives of the medical field, the creation of a vaccine according to the most optimistic forecasts will take several more months. Now the world has just started testing the first vaccines on humans. And it is not yet a fact that these vaccines will be successful. In general, doctors believe that the wait for industrial production of a vaccine against the COVID-2019 virus should not wait until the fall of 2020. That is, by that time, the world economy may have declined more than the IMF currently predicts.
Thus, there was no positive news during the past week. We believe that in these conditions, the US currency can continue to rise in price only if the second wave of panic or its similarity occurs. We believe that only because of the general belief in the US dollar, this currency can continue to strengthen, although there are no fundamental and macroeconomic reasons for this. We also continue to expect macroeconomic indicators for the European Union in March.
Trading recommendations:
On the 24-hour timeframe, the euro/dollar pair continues to trade near the critical line. We still believe that it is best to trade using a 4-hour timeframe analysis since there is no trend in the current chart. We also highlighted the narrowing range with two red lines, according to which the pair's activity will continue to fall, and a pronounced trend may not be available. On the 4-hour chart, traders need to overcome the level of 1.0818 to expect further strengthening of the US dollar.
The material has been provided by InstaForex Company - www.instaforex.com