Hello, dear colleagues!
Well, let's start with the main thing. Following the results of the two-day meeting of the US Central Bank that ended yesterday, it was decided not to change the parameters of monetary policy and to keep the main interest rate in the range of 0.00-0.25%. At the same time, the Federal Reserve System (FRS) will continue to implement an unprecedented program of buying bonds, the minimum monthly volume of which is determined by the amount of $ 120 billion.
The Fed said rates will remain at current low levels until there are clear signals that the world's leading economy is recovering. In the meantime, the US Central Bank notes an improvement in the economic situation, however, it is still worse than it was before COVID-19.
As for currency swaps, they will be extended until March 31, 2021. Inflation remains below the 2% target due to low oil prices and weak demand. As for the future prospects of the American economy, they will depend entirely on the degree of negative consequences of the coronavirus epidemic. At the very least, the impact of the COVID-19 pandemic on the US economy will be seen in both the short and medium term. No specifics. Well, the Fed has traditionally stressed its readiness to use the full range of available tools in case of such a need.
At his press conference, Fed Chairman Jerome Powell also mainly touched on the impact of the coronavirus pandemic on economic activity. The head of the Federal Reserve made it clear that the future economic course in the country will be extremely uncertain. It is a very convenient position to blame all the hindrances to economic recovery on the coronavirus. Naturally, the pandemic caused a significant blow to the American economy, but measures were taken to support it. Where are the positive results? No, they have certainly been traced in recent months, but this is how a monetary official of a much lower rank can write off everything on the COVID. Oh, this is not what market participants expected from Powell, as well as his fellow party member and protege for the position of head of the Fed, Donald Trump. As you know, the US president has never been a supporter of the introduction of strict restrictive measures in the country. Trump needs to restart and restore the American economy as soon as possible. This factor is his main trump card up his sleeve in the fight against Joe Biden in the upcoming presidential election. And here is the unfortunate pandemic that is most raging in the United States and vague economic prospects from the mouth of the chief American banker.
If we draw a line, the fact that the future economic prospects are fully linked to the COVID-19 pandemic and the minimum of specifics from the Fed head were disappointing. According to experts' forecasts, the Fed will adhere to this position at least until its September meeting.
Daily
Market participants' disappointment with the Fed's comments also had a negative impact on the US dollar. In yesterday's trading, the main currency pair significantly strengthened, ending Wednesday's session at 1.1790. As you can see, the euro bulls were able to overcome the resistance of sellers at 1.1781 and absorb the growth of the previous candle, which could play the role of a reversal, but only under certain circumstances and a different tone of the speech of the head of the Fed.
Trading recommendations regarding purchases of the euro/dollar pair after corrective pullbacks for the second day in a row in the course of trading are confirmed. Yesterday, the market declined to 1.1713 and gave an opportunity to those who want to buy a pair.
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As you can see, at yesterday's trading, the main currency pair was able to test a very strong technical level of 1.1800. It was reasonable to expect that the price would rebound from this mark. This is what is observed at the moment of completion of the article. Now the pair is trading near 1.1762 and may fall even lower, after which there is a high probability of a reversal in the north direction.
Conclusion and trading recommendations for EUR/USD:
Given the uncertain statements of the Fed and the continuing pressure on the US dollar, as well as the technical picture for the main currency pair, I recommend looking for purchases after short-term declines to 1.1747, 1.1720 and 1.1700. It is more aggressive and risky to try to buy on the market from current prices.
However, once again I would like to draw your attention to the strength of the level of 1.1800, as well as to the macroeconomic statistics. Today, data on the labor market in Germany and the Eurozone will be released, as well as German and US GDP for the second quarter will be published. All details are in the economic calendar. It is possible that the US GDP data will become the main macroeconomic event of today and affect the results of trading.
Good luck!
