After yesterday's jump to the area of the 15th figure, the euro is gradually declining against the dollar, due to the fears that the Federal Reserve will go to another unscheduled reduction of interest rates caused by the spread of the coronavirus in US, Australia, and Italy. However, no action was taken by the Committee, which slightly cooled the fervor of market participants before the meeting of the European Central Bank on Thursday.
Some economists expect the interest rates to remain unchanged, while some predict that they will fall. The deposit rate is said to decline by 10 bps to -0.60%, but there is a fairly high risk of its reduction by 20 bps. Nevertheless, without a real change in the key interest rate, infusion of liquidity, and expansion of the bond buyback program, any change is unlikely. On the other hand, bond yields in most of the countries in the Eurozone are already at historic lows, so it is likely that these measures will not be effective in the short term.
Meanwhile, the interest rates in the United States remain unchanged, although some leading economic agencies predict their further decline. The Fed is expected to cut the rate to near zero in the next couple of months, so it is likely that during the March meeting, the rate will be lowered by 50 bps, and then by another 25 bps in April this year, which will return them to the range of 0.25%-0.50%. However, note that only a real threat of recession in the US economy will force the Fed to lower its rates to the zero limit, and return to considering resuming the quantitative easing.
Yesterday, US President Donald Trump announced his intention to intervene with the country's current tax policy. He intends to discuss reducing the payroll tax in a meeting with representatives of the Republican party, but more specific details have not yet been disclosed.
Meanwhile, fundamental data came out yesterday, noting a decline in the US employment trends index in February of this year. Regardless, It did not significantly affect the market, even though the Conference Board reported that the index declined from 109.85 points in January, to 108.96 points in February. Compared to January 2019, the index fell by 1.3%. The Conference Board said that the coronavirus outbreak had almost no effect on the February index value.
As for the technical picture of EUR/USD, the pair will most likely move to the area of the lower border of the 1.1360 side channel, which was formed yesterday. Its breakdown will increase the pressure on risky assets, leading to the demolition of a number of stop orders, as well as a decrease in the euro to the area of the lows at 1.1300 and 1.1220. If the bulls manage to stay above 1.1360, a new wave of growth will lead to a re-update of the highs of 1.1430 and 1.1490.
CAD
The loonie remained to be fairly volatile, even though oil collapsed yesterday. The data on the bookmarks of new homes in Canada did not have a serious impact on the pair, even though the report showed that the number of new home mortgages in February 2020 decreased by 1.9%, and amounted to 210,069 homes per year. Moreover, the moving average of six-month mortgages in February was 208,525, as compared to its 211,153 in January.
Despite the decline in the indicators, the situation in the sector remains fairly stable, due to low interest rates and good condition of households. In January, the Bureau of Statistics of Canada reported that the total number of building permits in Canada increased by 4% and amounted to 9.25 billion Canadian dollars. Compared to the same period of the previous year, the number of permits increased by 11.2% in January.
As for the technical picture USD/CAD, the pair's further direction will depend on the oil market, which is now under pressure due to the coronavirus outbreak and the increase in production volumes by Saudi Arabia. Meanwhile, the buyers of USD/CAD will return, after the resistance of 1.36454 is broken, which will lead to an update of the local highs in the area of 1.3750 and 1.3810. Larger players, on the other hand, will be active, only after the correction in the area of the supports at 1.3590 and 1.3530.
