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April 4, 2020

First, a review of last week’s events:

  • EUR/USD. The German unemployment rate remained unchanged at 5% in March. But the data on the US labor market looks just terrifying: 6.648 million applications for unemployment benefits, this figure has increased by 10 million in two weeks, which is equivalent to 6% of the entire labor force. The number of new jobs created outside the agricultural sector went down: -705K in March instead of +275K in February. Other indicators are no better. It is possible that the unemployment will jump higher than during the great depression. And at the same time, the dollar has been growing all week, taking away more than 350 points from the euro, which indicates that the market was already ready for such a collapse of the US economy and took this into account in its quotes in advance. The dollar was also helped by statements from President Trump and the Saudi Energy Ministry about a possible return to the negotiations in the OPEC+ format and an end to the oil war. Although, there is as little clarity on this front as on the front of the fight against the COVID-19 coronavirus.
    At the end of the week, having made a five-day walk to the south this time, the EUR/USD pair reached a strong support/resistance zone around 1.0800, where it set the final chord;
  • GBP/USD. The most accurate forecast for this pair was given by graphical analysis, which predicted the sideways movement of the pair, which looks truly amazing. The pair stayed in the range of 1.2245-1.2485 for the whole week, and the scope of its fluctuations did not exceed 240 points, which, according to the current violent times, can be considered a flat. Some analysts believe that the reason for this is the increased interest of investors in the sharply cheaper pound in the first two decades of March, which leveled the current problems in the British economy;
  • USD/JPY. A similar pattern to the GBP/USD is also visible on the chart of this pair, which also stayed in a 180-point wide side channel all week (106.90-108.70). And this is despite the fact that the dollar index for the week rose by 2.5%. One of the versions that explains this behavior of both pairs is that investors and speculators were so caught up in the struggle between the two "titans", the dollar and the Euro, that they postponed a serious game on the pound and the yen for the future, when it is clear what is happening with the two leading economies of the world and what the next actions of their regulators are;

As for the forecast for the coming week, summarizing the opinions of a number of experts, as well as forecasts made on the basis of various methods of technical and graphical analysis, we can say the following:

  • EUR/USD. The regulators, both the Fed and the ECB, are now trying to put out the fire by flooding their markets with cheap money. But the fire of the corona crisis was so strong that it could not be controlled quickly. The data on the US economy for March leaves one speechless. But this is not all, the data for April, which we will see in a month, may look much more dramatic. In addition, the Federal Reserve's balance sheet is growing day by day, and its policy of easing reduces the attractiveness of the dollar as a safe haven currency. These arguments allow analysts at Nordea Markets to say that the EUR/USD pair is more likely to return to 1.1500 rather than to fall to 1.0000.
    On the other hand, even in the Eurozone, despite the current account surplus, things are not running smoothly. Germany and other Northern European countries that are members of the EU have recently rejected the offer of Italy, France, Spain and six other Euro zone countries to issue joint bonds – coronabonds. Whether they can overcome their differences will become clear in the very near future, on Tuesday, April 07, a meeting of the Eurogroup consisting of EU Finance Ministers is due to take place, and on Wednesday, April 08, the ECB meeting on monetary policy will be held. Also, the results of the OPEC meeting on Monday April 06 and the results of the Fed meeting on April 08 may affect the formation of trends.
    Meanwhile, 65% of experts, supported by graphical analysis on H4, 75% of oscillators and 90% of trend indicators, expect the downtrend to continue and the pair will decline to the lows of March 20-23 in the 1.0650 zone. The next support is at the level of 1.0500, the goal is the low of 1.0340 on January 01, 2017.
    It should be noted that when switching from a weekly to a medium-term forecast, the situation changes radically, and here 65% of analysts expect that the pair will turn around at the end of April – in May, first it will return to the height of 1.1100, then 1.1240, and eventually rise to the level of 1.1500. At the same time, 45% of experts do not exclude that this may happen in the nearest future;

 

  • GBP/USD. After such a difficult decision to leave the EU, the British regulators are doing everything possible to stabilize the economic situation. Against this background, 20% of analysts, in agreement with the graphical analysis on D1, expect the pair's sideways trend to continue in the range of 1.2245-1.2485. 50% of experts expect the channel to break down and reduce the pair to the 1.1640-1.1940 zone. The remaining 30%, on the contrary, side with the bulls, indicating the resistance levels of 1.2475, 1.2625 and 1.2840. As for the indicators, while most of the trend indicators are colored red, there is a complete discord among the oscillators: 25% on D1 signal that the pair is overbought, and the same amount on H4 show that it is oversold;
  • USD/JPY. 60% of analysts expect from this pair a breakout of the 108.70 resistance and a strengthening of the dollar to the level of 111.65. Further growth of the pair remains in question, as several attempts between March 20 and 25 were unsuccessful.
    Bear supporters among experts are now a minority - 40%, the nearest goal is to return to the lower border of the corridor 106.90-108.70. If it is broken through, the pair will first rush to the support of 105.00, then to 103.15, and then to the low of March 09 at the level of 101.15. It is difficult to say how long the pair will be able to cover this distance but considering the recent flights of 700 points a week, it can happen quite quickly.
    As for the indicators, the discord is similar to the GBP/USD. On H4, 70% of trend indicators and 75% of oscillators are colored green, while the rest are red. On D1, the picture is diametrically opposite. A compromise situation is offered by graphical analysis on H4: first growth to the zone of 111.00, then a sharp drop first to the support of 108.00, and then another 100 points lower;

NordFX EU


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