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FxPro
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EURUSD Wave Analysis

  • EURUSD broke support area
  • Likely to fall to 1.100

EURUSD under bearish pressure after the earlier breakout of the support area lying between the support level 1.1060 (which reversed the price twice in December) and the 50% Fibonacci correction of the previous upward ABC correction (2) from September.

The breakout of this support area accelerated the active impulse waves 3 and (3).

EURUSD is likely to fall further toward the next support level 1.100 (former double bottom from November).

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USDCHF Wave Analysis – 03 February, 2019

  • USDCHF reversed from support area
  • Likely to rise to 0.9710

USDCHF recently reversed up sharply from the support area lying between the key support level 0.9630 (low of the previous daily Morning Star) and the lower daily Bollinger Band.

The upward reversal from this support area stopped the earlier short-term impulse wave 5 – which started earlier with the daily Evening Star from the resistance level 0.9765.

Given the strong bearish sentiment affecting the Swiss franc – USDCHF is likely to rise further toward the next resistance level 0.9710.

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FX majors and Dow Jones are close to important milestones

All three major American indices have updated their historical highs, adding more than 1% on Wednesday. Futures on the index are growing on Thursday morning after another portion of good news. Here are just a few of them: the spreading of coronavirus has slowed sharply, Chinese doctors reported a breakthrough in vaccine development, extremely positive news on the US labour market in January and China announced that it will halve tariffs on 1717 US import products.

Shanghai’s China A50 blue-chip index won back 70% of the decline after markets opened on Monday. The U.S. Dow Jones added by more than 1.5% on Tuesday and Wednesday and is trading close to 29500 this morning, adding 1300 points this week. With such bull run, 30K level may be taken as early as this week, attracting additional interest from market participants and spreading the positive vibes to other markets.

This growth of stock indices must not be connected with expectations of policy easing. Purchases strengthened on the back of solid employment data from ADP, which showed the jobs increase by 291k in January. A little later, the positive agenda was supported by higher than expected activity of indices in the service sector. Both Markit and ISM estimates unanimously show stronger growth since September-October, responding to lower rates and liquidity injections from the Fed and trade talks progress.

Strong statistics caused markets to reassess the chances of new policy easing from the Fed. This turn in expectations supported the dollar, which added 0.9% against the basket of six major currencies to the two months highs. The key currency pairs approached the critical round levels, too.

EURUSD declined to 1.1000, to area where it received the buyers’ support since November. The publication of Friday’s statistics may confirm or weaken this trend. Healthy US data is likely to bring back into the market focus the bright contrast between the US and Europe growth in favour of the former.

The same goes for GBPUSD. The British pound slipped below 1.3000, a kind of waterline of the last three years. The pair traded lower THAN this level during the periods of investors’ anxiety for the economy after Brexit.

USDJPY is testing 110, another crucial round level, as the outcome of the struggle for it may be decisive for the trend of the next days and even months.

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GBPJPY Wave Analysis

  • GBPJPY reversed from support area
  • Likely to rise to 143.40

GBPJPY recently reversed up from the support area lying between the pivotal support level 141.00 (which has been reversing the price from October), lower daily Bollinger Band and the 38.2% Fibonacci correction of the pervious upward impulse wave (C).

The upward reversal from this support area stopped the earlier short-term impulse wave 3.

GBPJPY is likely to rise further toward the next resistance level 143.40 (top of the pervious short-term corrective wave 2).

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Euro sinks under 1.1000, aiming lower

Still, there are significant differences between the growth of European and American indices in the form of dynamics of local currencies. U.S. markets are moving upwards amid positive macroeconomic data. At the same time, the effect of previous actions of the Fed has not yet fully reached the economy, tuning investors for even more significant improvement in the coming months.

A different story in Europe. Industrial production reports published since the last week in Germany, France, and Italy showed a decline of 6.8%, 2.8% and 4.3% YoY, respectively. Germany factory orders dropped 8.7% YoY, the lowest since 2009, becomes a further worrying indicator.

Adding to the pessimism is that all these reports refer to December, long before the coronavirus problem appeared on investors’ radars. Therefore, these data, often having a very short-term effect on the euro rate, this time launched a sale of the single currency from levels, where it previously got support. Very cheerful American statistics confirmed the contrast in these regions, opening the way for EURUSD to decline from psychologically important level 1.10.

Strictly speaking, the pair declined under this level on Thursday but traded close to this line, pulled away only on Friday and developed decline on Monday to 1.0900 area by Tuesday morning.

The nearest support level may be the area 1.0880, where the Euro pushed off in early October. However, Germany is also a major exporter to China and not just an importer. Therefore, its growth rate may suffer much more than the U.S.A. in the coming months, requiring more stimulus accordingly.

The difference in the current figures and the nearest forecasts explain the significant pressure on EURUSD, opening the way to the further decline of the pair to 1.0750 by the end of the month. This decline fits into the general pair’s downtrend, formed in 2018 with the first volleys of the trade wars. But the coronavirus outbreak may become the factor that would accelerate the decline of EURUSD to 1.05 area or even lower before the 1Q20 end.

If by the middle of the year, the U.S. keeps healthy growth rates, while Europe and China continue to suffer, it is reasonable to expect EURUSD to decline close to parity by the third quarter.

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Gold sets records in euro and strives even higher

Apple has returned to the market fear of the coronavirus’ impact on the economy. The company said that the recovery of supply and sales might be delayed. Such reports from the most expensive US company, supported by a portion of cautious comments from RBA, have returned to the markets demand for save-heaven assets and was beneficial for gold.

Earlier this morning, investors saw in RBA’s recent protocols hints for policy easing preparedness.

Gold prices rose above $1,585 per troy ounce, coming close to January high when prices reached 7-year peaks. The value of gold in the euro since this morning reached record levels above €1,465 mainly due to the single currency weakening.

So far this year, the growth of gold was enhanced by two different drivers. The most frequently mentioned one is the demand for gold as insurance during times of geopolitical instability and financial markets storms. For this reason, gold strengthened on the news of Iranian-US conflict and at the peak of coronavirus fears.

Another reason is the demand for gold as a means of preserving capital against inflation. Massive stimulus from various central banks eventually spurred up commodity prices around the world. Last week, macroeconomic reports across the globe clearly showed an increase in consumer price growth rates. This effect can continue to gain momentum as the People’s Bank of China and other Asian central banks strengthen the easing policy. At the same time, the Bank of Japan and the ECB repeatedly say they are ready to “strengthen monetary easing”. Now RBA has joined this company.

We see that waves of fear in the markets alternate with periods of hope that the central banks’ stimulus will work. Last week, a second factor dominated, pushing stock indices up around the world. At the same time, European and US markets were updating their historic highs.

But even with softening of fears gold was experiencing moderate correction kickbacks, maintaining the upward impulse formed in December. Moving upwards from one consolidation area to another, the gold price may grow up to levels around $1,700 (last observed in early 2013) or even jump to $1,800 (peak values of 2012) in the coming months.

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What’s dragging EUR down: then trade wars, now the coronavirus

 

The single currency fell to 3-year lows against the dollar as indices of German and US business sentiment published the day before sharply contrasted with expectations. The ZEW Indicator for Germany is referred to as a leading economic indicator. This time, it unpleasantly surprised economists. The February data showed a sharp decline from 26.7 in January to 8.7 in February. The assessment of the current situation also stopped improving. It went deeper into the negative territory, showing the deterioration of evaluations over the past eight months.

Immediately after the release of this data, the euro tried to keep above 1.0830 but then failed at 1.08, where it remains today under the pressure of US data.

The New York Federal Reserve’s Empire State business conditions index jumped from 4.8 to 12.9, the highest level since May last year, in response to Fed stimulus and partial trade agreement with China.

Overall, both US and European businesses are vulnerable to global trade problems and business cautiousness due to coronavirus effects. Both America and Europe provide a similar response to threats by softening monetary policy. Time after time, we see that business in the US is quickly returning to the norm, while Europe is facing some challenges for an extended period after the release of data.

Such imbalance causes the euro/dollar pair acts as a stabilizer, moving in favour of stronger counterpart. Recently, the markets are increasingly afraid that Europe might need new monetary stimulus. At the same time, we see more often the US could cope with the situation. The weakening of the euro against the dollar may well continue in the coming weeks and months until we see a reversal of the fundamental indicators.

It is also interesting that the European currency is inferior to the pound. The EURGBP dropped yesterday below 0.83, the low area since 2016, as the robust labour market statistics helped the sterling. The data on the growth of unemployment claims only by 5.5K in January can hardly be called healthy: over the last three years, we saw the monthly decline only three times. Still, these figures turned out to be much better than the forecast for an increase of 20.2K. It turns out that UK’s official exit from the EU did not turn into a barrage of layoffs, and the unemployment rate at the end of the year remained at multi-year lows.

At the same time, the euro is testing multi-year lows against the two most popular competitors at once: the dollar and the pound. The weakening of the currency is considered as a boon for the economy in the medium term, as it spurs export growth. However, this weakness of the euro is now a sign of disease in the region’s economy. It may continue until the emergence of “green shoots” from the economic indicators.

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The dollar index has been growing almost daily in February, adding 2.5% from the beginning of the month to its peaks from May 2017. The dollar index tracks the USD against the six most popular world currencies, where the yen and the euro can be considered the main catalysts for a decline, having lost 3.0% and 2.6%, respectively.

Nevertheless, smaller and secondary currency pairs also deserve traders’ attention, the movement in which is a kind of manifestation of profound processes of financial markets. Judging by these movements, the longstanding carry-trade idea becoming obsolete, as the high-yielding currencies of emerging markets are no longer highly profitable and the central banks of these countries are softening their policies in the attempt to revive economic growth.

Against the backdrop of the coronavirus epidemic and the Chinese authorities’ efforts to stimulate the economy, the Yuan is weakening. The Dollar is again worth more than 7 Yuan due to the easing of monetary policy of the authorities and fears of investors about a sharp cooling of China’s economic growth. The 7.0 mark was and remained an essential barometer of sentiment in China. The price dynamic above this level reflects the continued uncertainty in markets about future growth prospects. In early 2017 and late 2018, the Yuan was heavily protected by PBC near this level. The signing of Phase One trade agreement also returned the renminbi underneath this waterline. However, the demand for the Dollar pushed the pair higher earlier this week.

The weakness of the Yuan and the Chinese economy also affected the Australian Dollar. AUDUSD is declining again this week, updating its 2009 lows below 0.67. It was a kind of waterline at 0.70, and the pair failed its attempt to climb higher at the end of last year.

A separate story is a Turkish Lira. This currency does not depend on problems in China so that it can be viewed as a different story. The USDTRY broke through 6.0 this week, following another cut of the rate by the Turkish Central Bank. TCMB has been more focused on reviving economic growth in recent months, rather than curbing inflation.

The steady downward trend of the lira against the Dollar has been observed for more than a month, and last week the pair crossed the 6.0 level, returning to last year’s highs. Above the current mark (6.08) the pair was only in May 2019 and from August to October 2018 during the period of extreme volatility in the pair. It seems that now the markets are trying to find the “ceiling” for the pair, the growth above which will be sensitive for the policymakers, forcing them to stand up for their currency.

The same can be said about the South African Rand, which crossed the mark of 15.00 in USDZAR, which was repeatedly tested for strength in recent years but did not stay long. The weakening of the Rand against the Dollar looks more surprising as it is happening against the background of robust gold price growth, that previously determined the price direction of ZAR.

The Ruble still stands aside from the general trend in EM currencies for weakening. USDRUB is moving below 64.00, which is markedly under the peak area of recent years by 70.

On the one hand, it indicates the strength of the Russian currency: investors are not in a hurry to sell it during the period of high demand for Dollar. However, history suggests that like a real Russian, the Ruble may “gather its thoughts” for a long time, and then drop even harder than others.

As the actions of the Russian central bank and government become more and more inflationary, the risks are rising that the Ruble will rush to catch up to the world in pursuance of weakening against the Dollar.

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USDJPY Wave Analysis

  • USDJPY reversed from resistance area
  • Likely to fall to 110.15

USDJPY recently reversed down with the daily reversal pattern Bearish Engulfing from the resistance area lying between the multi-month resistance level 112.10 (which has been reversing the price form March of 2019) and the upper daily Bollinger Band.

The downward reversal from this resistance area started active short-term corrective wave 4.

Given the moderate Yen bullishness seen today – USDJPY is likely to fall further toward the next support level 110.15 (monthly high from January and the target for the completion of wave 4).

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Euro took advantage of the US market sell-off

However, the dynamics of Asian markets look calming again. Indices have been rising at the start of the day. However, it appears more like a fluctuation near the bottom than a reversal towards growth. On this basis, it is worth paying particular attention to the dynamics of the currency market, in particular its central pair – EURUSD.

The euro rose against the dollar following the results of the previous three trading sessions, gaining the support of buyers after the drop below 1.08. On Wednesday morning, the euro traded at $1.0870. However, it is worth noting a cautious reversal of intraday highs around 1.0890 last evening.

Since the beginning of the month, concerns around the coronavirus were associated with increased demand for dollars against the euro as the European economy seemed more vulnerable to the slowdown of China. So what has changed?

The prospects for interest rates. Since last week, markets aggressively priced in the Fed’s rate cuts later this year. According to FedWatch from CME, there is a near certainty probability of the rate cuts in the coming months.

As a result, the yield of 10-year Treasuries updated historic lows at 1.31%. 30-year bonds have been updating their yield lows for several days now. Extremely low yields for long-term bonds reduce the demand for the dollar. Yields on European government bonds, for example, German government bonds, are also declining but still above their lows of last year, avoiding a serious revaluation.

Besides, it is not yet expected that the ECB will make the same rapid transition to policy easing as the Fed. This makes EURUSD temporarily attractive for buyers amid weakening world markets.

It won’t be wise to call the euro a safe-haven these days. However, as long as the U.S. debt market is experiencing significant revaluation of long-term expectations, the euro has a chance to form a rebound from recent extremums with potential to recover to 1.10 this week and 1.11 by the end of March.

This rebound will continue to fit into the long-term downtrend of the pair, so it may not encounter much resistance in the early stages.

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Dollar may turn to growth as markets overdid Fed expectations

During slightly more than a week of a market correction, the dollar index lost 2%, returning closer to the middle of last year’s trading range after reaching 3-year highs on February 20. The transition from dollars to less yielding currencies occurred along with a sharp review of expectations for the Fed’s monetary policy. At the moment, futures on the rate indicate a 100% probability of cut by 50 points already in March and 80% probability of another cut in April.

As of February 20, the markets were giving almost equal chances to keep the rate at the current level (1.50%-1.75%) or one cut (1.25%-1.50%). Earlier last week, we wrote that the dollar declined against the euro and the yen on growing expectations of active policy easing steps from the Fed compared to the ECB or Bank of Japan.

The move away from dollars followed after a sharp drop in the yield of US government bonds, which decreased the difference in their yield with German and Japanese securities. However, the markets, in our opinion, overdid it at the end of last week.

Often the full effect of the rate changes in the economy is visible after 6-9 months. With this in mind, sharp cuts are only possible with forecasts of a long and intense cooling of the economic activity. Nowadays, the majority of the market participants are inclined to think that the effect will be short-term, though sharp.

It is more likely that market support measures will be more focused on short-term liquidity injection, and interest rate cuts will be less decisive, as they can not support economic growth directly. However, it is not possible to return markets to increase during the shock and panic period.

There is another point. Coronavirus is now affecting Europe and Japan the most. This is due to both the higher number of people getting sick and closer ties with Chinese manufacturing companies. It would be logical for the Bank of Japan and the ECB to stimulate the economy more actively than for the Fed.

Bank of Japan announced this morning that it would take necessary steps to stabilize markets. This announcement strengthened expectations of coordinated action from major central banks and governments. For the currency market, it could be a turning point. Last week traders were too aggressive on the Fed’s rate cuts, much more aggressive than ECB and BoJ.

Likely, in the coming days, such a revaluation of expectations will also put pressure on long-term interest rates of Eurozone and Japanese government bonds. For the US, on the contrary, we can hear assurances that the Fed is unlikely to meet the markets’ latest expectations.

This means that the currency market pendulum has a high chance to swing back to the dollar side and increase pressure on the euro and yen.

On Monday morning in the thin market EURUSD was rising to 1.1070, having stabilized at 1.1050. The USDJPY at the very start of trading declined to 107 but managed to reverse to 108.30 by the beginning of trading in Europe, mainly after Kuroda’s words. In our opinion, this is just the beginning of the rebound, which may last for several days.

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A multi-year USD downward trend has probably begun

In recent days, the foreign exchange market has consistently points to a high level of concerns among investors. However, the stock market has had a short break in the form of a bounce. As it often happens, currency movements act as a more reliable barometer of sentiment, especially during the period of high uncertainty on the stock markets.

The stock indices rebound on Wednesday was accompanied only by the suspension of the Swiss franc and yen growth. Due to negative interest rates in the Eurozone, the single currency is also increasingly visible to investors during periods of sell-off of risk assets.

USDJPY dropped on Friday morning to 105.8, the low area since September 2018, where it was at the peak of fears of the consequences around trade wars. However, it is essential to pay attention to the dynamics, not to the absolute figures. In two weeks the pair lost 5.7% – the sharpest two-week decline since 2016. The confident dynamics below 105 causes us to consider the levels near 100 as the next stop for the pair.

USDCHF shows even wilder fluctuations, falling in the area of 0.9440, where it was two years ago and now shows the most significant drop since the beginning of 2018. It should also be understood that the franc has entered the area of the minimum trading range of the last five years. Further demand for protective assets is quite likely to take the rate to the next level – in the support area of 2014 near 0.8700.

The single currency also passed a significant local level at 1.1200. With a sharp movement yesterday, the pair broke the resistance of the descending corridor and fixed above the 200 SMA. Despite the local overbought, such a sharp growth suggests that the euro is beginning a long growth trend against the USD. More precisely, it can be called a tendency for the dollar weakening against major currencies.

In the short term, demand for the yen, the franc and the euro, as safe-havens, means that demand for protective assets prevails against the background of liquidation of risk positions. Put, it is a symptom of further market weakening in the coming days. From a longer-term perspective, a weak dollar will sooner or later turn the markets towards growth. In our case, we should say that the situation will worsen first, and only then will correct.

If the actions of the U.S. authorities are active enough, it will allow avoiding the bearish market in stocks, keeping the current decline within the correction zone. For the USD, however, such a policy may become a turning point, interrupting its growth in recent years, with the same dynamics as was in 2002-2008, when there was a multi-year weakening of the USD with short breaks.

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EURUSD correcting overbought, potentially aimed to 1.1300

The EURUSD, which reached 1.1495 on Monday, slid back to 1.1360 before the start of trading in Europe. Since February 20, the pair jumped by 6.6%, which made it vulnerable rollback. There are also more fundamental reasons for this correction.

Europe was more affected by coronavirus than the United States, which can be seen both in the number of death and total cases of diseases, as well as in the impact of quarantine on the economy. At the same time, the weakening of the dollar against the euro was due that the Fed has more room to cut rates. Last Tuesday’s emergency rate cuts formed expectations that the US central bank may further soften the policy, which caused the growth of demand against the dollar. Also, the US data was weaker than expected in contrast to slightly more positive estimates in Eurozone.

However, with ECB meeting scheduled this week, it is worth to be prepared that it may announce more monetary easing. More measures may help to fight the consequences of the coronavirus quarantine and to reduce the pressure in financial markets.

As interest rates in the eurozone are already in negative territory, it would be more logical to expect the expansion of the QE program. These measures are not as painful for the suffering banking industry as more negative rates.

The technical analysis suggests that the development of the corrective rollback in the EURUSD may send it to the area of 1.1300. This move potentially may offset the overbought and taking the pair to the level of 61.8% of the rally, according to the Fibonacci theory.

In the longer term, we believe it is more likely that the downtrend of the dollar will develop due to the expected easing of the Fed’s policy and lower demand for the US government bonds, the yields of which have fallen sharply in recent weeks, reducing their attractiveness compared to the European ones.

Besides, the “Trump effect”, which methodically urges the Fed to cut rates to levels lower than in Europe, should not be written off entirely. Although the US president has no direct influence on the Fed, he still choose Fed governor candidates, gradually forming a “right” team.

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Currencies indicate that the market bottom is yet to come

The rush of early buyers should be cooled down. It is much more likely that we saw a peak of volatility on Monday in the markets, but it may not coincide with the bottom of the recession.

On Wednesday morning, Asian indices and futures on American indices turned red again. Investors were disappointed that the US government did not make any announcements, which brought back the demand for safe assets, although not in such a ugly form as on Monday. Once again, the dynamics of the currency market may become a reflection of investor sentiment. And in this case, there are more negative signals tuning for further decline of the markets.

USDCAD, despite the fluctuations in the stock market and cautious purchases of oil, updates the highs on Tuesday. The pair seems to be moving on inertia, having risen above the tops of late-2018 and mid-2017, reflecting the negative mood of American investors.

The AUDUSD trades on Wednesday morning around 0.6500. On Monday alone, the Aussie dropped from 0.6620 to 0.6300 and rose to 0.6680. However, the pair is now near this year low. Most likely, the markets are tuning that the peak of decline is already behind us as the Chinese factories are returning to work. At the same time, investors are waiting for some positive drivers, not rushing to buy risky assets. A decrease in AUDUSD to the same levels of the midst of the global financial crisis showed that sharp fluctuations might become a new reality for Aussie for the next few months. However, the bottom may have already passed here.

EURCHF is quite suitable as an indicator of sentiment in Europe. Since last December, it keeps the downward trend, avoiding the increased volatility in recent days. After sinking below 1.06 at the end of February, the pair entered the lows of 2015 area, reflecting the gradual decline of economic activity in Europe. Buyers became slightly more active as the exchange rate dropped below 1.06, and some indicators register that the selling momentum is weakening. However, so far, there are no significant signals that would allow us to talk about trend reversal upwards from Monday.

Neither buyers’ activity nor government actions allow us to say that the lowest point for the world markets are already behind us.

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Stronger EURUSD is a good sign for markets

The actions of the world’s central banks are holding back the rollback of financial markets, which have moved uncertainly into the green zone since the opening of trading on Monday. As in the past, we believe we should be cautious about spikes in market optimism as long as coronavirus outbreak continues to accelerate. On the positive side, there are some signs of stabilisation of the daily growth of new infection cases. This allows us to make cautious predictions that current quarantine measures in Europe and the United States won’t be tightened further. But still, it is too early to talk about their removal – for this to happen, the number of new infections must shift to a steady decline.

With the authorities of all countries pushing the monetary easing pedal to the floor, it becomes even more difficult for traders in the currency market to identify trends. The last such example in modern history was in 2008/2009. As a result, we can conclude that currencies will be extremely volatile, feverishly fluctuating from growth to decline at record rates.

We saw it at the end of 2008 when EURUSD declined from 1.45 to 1.23 in 5 weeks. It took about the same time to bounce back, but then there was another 10-week decline in the area of 1.25. Subsequently, the pair returned to growth shortly before the upward reversal in the markets. If EURUSD is an equally reliable indicator for the markets this time, then we can expect with some caution the repeal of the situation towards improvement.

Right now, at the start of trading at the beginning of the week, we are witnessing EURUSD rollback by 0.6% to 1.1070 from 1.1140. At the same time, the movement towards the dollar may be due to the end of the quarter dollar demands. Thus, have a short term impact on markets. An important signal for traders is last week’s closing EURUSD above the 200-day average, which often precedes a significant increase in pair purchases in the coming days and may also serve as a harbinger of a global trend reversal in the pair for growth.

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AUDNZD Wave Analysis – 02 April, 2019

  • AUDNZD reversed from round resistance level 1.0300
  • Likely to fall to 1.0200

AUDNZD recently reversed down from the round resistance level 1.0300 (former strong support from 2019), intersecting with the 61,8% Fibonacci correction of the previous downward impulse from the start of March.

The downward reversal from this resistance area created the daily candlesticks reversal pattern Shooting Star.

Give the strength of the daily downtrend from last November – AUDNZD is likely to fall further toward the next support level 1.0200.

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AUDCHF Wave Analysis – 07 April, 2019

  • AUDCHF broke resistance area
  • Likely to rise to 0.6150

AUDCHF recently broke the resistance area located between the key resistance level 0.5950 (which has been reversing the price from the middle of March) and the 50% Fibonacci retracement of the pervious sharp downward impulse from February.

The breakout of this resistance area should accelerate the active impulse wave (c).

AUDCHF is likely to rise further toward the next round resistance level 0.6150 (standing close to the 61.8% Fibonacci retracement of the downward impulse from February).

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Gold and Silver’s shining future

American indices closed the trading session on Monday with 7% growth on S&P500 and 7.7% on Dow Jones. Both indices closed above the levels of the previous rebound at the end of March, further fueling the growth of foreign bourses at the start of trading on Tuesday.

The positives come from several directions at once. For the second day in a row, the number of new COVID-19 infections in the world is decreasing. In most European countries, the trend for reduction is confirmed. This is evidence that quarantine measures have the right effect by knocking down the spreading wave.

At the same time, the authorities of the most affected countries are not tired to declare new funds to fight the consequences. Italy has announced a new package of measures worth 400 billion euros to support small and medium businesses, increasing the overall package to more than 800 billion (about 50% of GDP). US lawmakers are considering another package “for at least $1 trillion” in addition to the $2.6 trillion. Federal Reserve said it would allow banks to cash out loans issued under the program of assistance to small and medium businesses – a way to put money into the economy quickly.

These measures reduce the pressure on the markets, causing some weakening of the dollar. Of course, it’s too early to try to estimate whose incentives will be larger and faster to enter the economy. The answer to this question will help to understand the future trends of the currency market. Initially, the side, whose “supply” of currency will increase more strongly will feel worse.

At the same time, gold and other commodity assets may experience additional growth impulse on the background of widespread money printing by governments around the world.

For example, after the market storm in October 2008, the price of gold tripled within three years. We are witnessing similar processes now. Lower currency market volatility and a trend reversal on stock exchanges allowed gold to strengthen by $220, or 13%, in slightly more than two weeks.

Silver rose by almost a third at the same time, to $15 per ounce, recovering strongly from earlier losses.

After a reversal to growth in 2008, silver’s value increased by almost six times, from $8 to $50, twice as fast as gold.

Silver is much less considered an asset to save the value of capital. It is more affected by production trends, that makes it vulnerable to market collapse since late February.

Strong government support measures for business activity give hope for a V-shaped recovery in the industry, as we saw in China earlier this month. Together with the almost ubiquitous flooding of money, this will allow silver to turn towards growth, potentially more solid growth than gold.

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GBPJPY Wave Analysis – 09 April, 2019

 
  • GBPJPY broke resistance area
  • Likely to rise to 136.95

GBPJPY recently broke the resistance area lying between the key resistance level 134.00 (which stopped the previous wave A in March) and the 50% Fibonacci retracement of the downward impulse C from February.

The breakout of this resistance area continues active short-term impulse wave C – which started earlier this month.

GBPJPY is likely to rise further toward the next resistance level 136.95 (former strong support from the start of March and the likely price for the completion of the active impulse wave (i)).

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FxPro
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Gold Wave Analysis – 09 April, 2019

 
 
  • Gold reversed from support level 1640.00
  • Likely to rise to 1700.00

Gold recently reversed up from the support level 1640.00 (former top of the pervious correction (a) from March) coinciding with the support trendline of the sharp up channel from last month.

The upward reversal from the support level 1640.00 continues the active short-term impulse wave (c) – which belongs to the daily ABC correction 2.

Gold is likely to rise further toward the next strong resistance level 1700.00 (top of the pervious multi-month upward impulse sequence (5) and the target for the completion of the active impulse wave (c)).

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