4-hour timeframe
Average volatility over the past five days: 84p (average).
The EUR/USD pair was extremely calm and even aloof during trading on Wednesday. The euro/dollar pair was inside a narrow side channel for most of the trading day, which we have already discussed in previous articles, 1.0817 – 1.0900. There was no attempt to leave it during the day, and a relatively strong fall only began during the US session, which can lead quotes out of a narrow price range. No macroeconomic statistics were published today in either the United States or the European Union. Thus, even if traders wanted to react to statistics now, they did not have anything. Those who were interested in the euro/dollar pair only received data on the next aid packages to the economy. We are talking about an additional $480 billion in the United States, $340 of which will go to support small businesses in the form of cheap loans. $75 billion will be spent on medicine and $25 billion on tests for coronavirus. Thus, both the European Union and the United States continue to lend to businesses as soon as they can. However, you can not say that the economy is not bursting at the seams due to the pandemic and quarantine. All we see is that every week or two governments are sending more and more funds to support the economy, but how long will this continue? According to the latest data, the coronavirus will not be completely defeated in 2020, it will not be possible to create a vaccine and immediately treat the entire population of the planet with it. Thus, second waves and third waves are possible, and it is simply impossible to completely remove quarantine measures without the presence of medication. It is unlikely that the Covid-2019 virus will simply disappear by magic. It turns out that the EU and US governments will continue to flood their economies with money. Small and medium-sized businesses will get as many loans as they want, but they will also need to be returned, even if they are interest-free. Or, after the crisis ends, governments will simply need to write off all these debts. And we are talking about trillions of dollars and euros here. We believe that such measures can help businesses, citizens and the economy as a whole only for a short period of time, say up to six months. After that, either the economy could only stay afloat due to the support of further credit injections, and when the current crisis ends, a new one begins - mortgage and credit, or the economy will start to collapse without waiting for the coronavirus crisis to end, despite all the injections into the economy from governments and central banks. In any case, it is necessary to prioritize medicine in the fight against the current crisis. Unfortunately, its possibilities are not unlimited. It supposedly takes about a year to create a vaccine. If it takes 3-6 months to conduct clinical trials of a vaccine, then there is no escape from these numbers. You can not put the vaccine into mass production without studying its side effects. And side effects may not appear immediately, but after some time. Accordingly, time will matter in the vaccine testing phase. So, even theoretically in the near future we will not see a vaccine that could completely kill the virus and is also 100% safe for humans.
4-hour timeframe
Average volatility over the past five days: 143p (high).
The GBP/USD pair turned up and began a round of correctional movement. Correcting to the Kijun-sen critical line, the pair rebounded off this line and is now trying to resume downward movement. Volatility has slightly decreased compared to yesterday, which is encouraging since yesterday we believed that the second wave of panic had begun. Nonetheless, the total collapse of oil quotes cannot be called a factor that calms global markets. However, traders corrected the pair today and slightly decreased their activity. From a technical point of view, as we said earlier, the British currency will fall in almost any case. The first very likely scenario involves forming a new downward trend after 70% correction relative to the previous one. The second scenario assumes a "correction against correction", in which case we expect a downward movement to the 1.1900 level. At the same time, we do not recommend blindly placing Take Profit orders near this level. As before, we remind you that almost everything is possible on the Forex currency market. Even that which cannot be in principle. Oil quotes perfectly showed us that oil can also be traded at a negative cost. Thus, first of all, we carefully analyze the technical indications of indicators, after which we enter the market.
The macroeconomic and fundamental backgrounds are just backgrounds for trading on almost all currency pairs. They have no effect on market participants or their mood. The UK consumer price index for March was published today. This is a very important indicator in normal quiet times, and it means almost nothing at this time of crisis. Inflation in Britain slowed to 1.5% in annual terms and to 0.0% in monthly terms. Thus, we can assume that the statistics today were on the side of the US currency, which... it was cheaper for most of the day. Yesterday, the British pound fell all day when the most important report on applications for unemployment benefits in Britain turned out to be much better than forecasts. In principle, this is all that traders need to know now about the impact of macroeconomic statistics on the movement of the pound/dollar pair.
And another important factor that concerns both pair. The current crisis in the currency market began with an unprecedented growth of the US currency. There was only one reason for this. Investors and traders believed that in times of crisis, it was best to keep their money in dollars. Or to pour their capital into the most powerful economy, that is, the American one, which again requires dollars. Then, of course, there was a pullback, a correction, but in general, a second wave of growth of the US currency is now quite likely for the same reasons, given what is happening on the commodity market and huge aid packages to the European and American economies, which only limit their fall at most.
Recommendations for EUR/USD:
For short positions:
The EUR/USD pair continues to adjust inside the side channel on the 4-hour timeframe, which it could not leave today. Thus, sell orders now formally remain relevant, but we recommend waiting for the price to be confidently fixed below the level of 1.0817 and only then should you sell the euro currency with the first goals of 1.0793 and 1.0762.
For long positions:
It is advised to return to euro purchases only when the price has been consolidated above the critical Kijun-sen line and the upper side channel line at 1.0900 with the first targets of 1.0930 and 1.0971.
Recommendations for GBP/USD:
For short positions:
The pound/dollar began an upward correction today, which could already be completed near the Kijun-sen line. Thus, now we advise you to sell the pound with targets at 1.2276 and 1.2147, since a rebound occurred from the critical line.
For long positions:
It is recommended to consider new purchases of the GBP/USD pair not before consolidating the price above the Kijun-sen line in small lots with the first goal of pivot level 1.2517.
