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EURUSD: Eurobulls use US Fed decision as springboard

On Friday, March 13, the euro was down at the close of trading. The price remained within Thursday’s range. The price fall began during the European session and intensified during trading in New York after US President Donald Trump’s speech. He declared a state of emergency in the country in connection with the coronavirus pandemic. Trump promised to allocate a significant amount of funds to help alleviate the strain on affected states.

Investors responded positively to his statements, as they believe that emergency measures will be effective at dealing with the virus. Stock indices rose significantly. At the end of the day, the S&P500 and DJAI index grew by 9.36% and 9.28%, respectively. The yield on 10-year US government bonds rose to 1.019%, up from a record low of 0.36%,

Today’s news (GMT 3):

  • 10:30 Switzerland: Producer and Import Prices (MoM) (Feb).
  • 14:00 Germany: German Buba Monthly Report.
  • 15:30 USA: NY Empire State Manufacturing Index (Mar).
  • 23:00 USA: Net Long-Term TIC Flows (Jan).

1603 the euro was down at the close of trading 1303

Current situation:

The expectations laid out on Friday were fully justified. The EURUSD pair fell to the target of 1.1110.

On Monday, March 16, trading opened with a sharp increase to 1.1199. On March 3, the US Federal Reserve lowered its key interest rate from 1.5-1.75% per annum to 1-1.25% against the backdrop of the developing risks caused by the situation with the coronavirus (COVID-19). On Sunday, March 15, the agency lowered its key rate by 100 bp, to 0-0.25%. The committee plans to maintain the current range until it is sure that the economy has weathered the storm caused by recent events and is on its way to achieving its targets in the fields of employment and price stability. These targets are aimed at maintaining economic activity, developing favourable labour-market conditions and keeping inflation in-check. Once the situation has stabilised, the Fed plans on returning to its 2% target.

For almost four hours, bulls lost almost all of their profit made since the opening. This can be attributed to the fall of Asian stocks amidst the pandemic. Outside of China, the virus is spreading very quickly. In Spain, the armed forces have stepped in to help deal with the coronavirus. They are already patrolling the streets of Valencia, Seville, Zaragoza, Leon, Las Palmas and Santa Cruz de Tenerife. Sanctions for violation of the quarantine regime are very strict.

Disobedience or resistance towards officials, in cases where this does not constitute another crime, in particular, such as refusing to cooperate in identifying or providing false or inaccurate data in the process of identification carries a fine from 600 to 30,000 euros. Malicious disobedience or resistance towards the relevant authorities is punishable by imprisonment of three months to one year.

At the time of writing, the euro is worth 1.1142. On the hourly chart, a reversal formation appeared which points to growth, but its formation may drag on until mid-Tuesday. Since the price is trading below the balance line (Lb) and given the volatility of the situation surrounding the virus, it is assumed that bears will look to defend the 1.1230 level. A compromise for Monday would be the continuation of lateral movement under the Lb in the range of 1.1060 -1.1205. A breakdown of the resistance around the 1.1225-mark will open up the way for bulls to reach 1.1305, however, there is no guarantee this will come to fruition amidst the current situation with the coronavirus.

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