Today we shall take a look at the EUR/USD currency pair. The trend of this pair over the past few days has been quite volatile. After a steady increase up until March 9, last week the pair tumbled again, but today the trend became bullish once more.
At the moment, the most significant development affecting the euro is the coronavirus outbreak, as the disease continues to spread rapidly throughout Europe (and the rest of the world). Most other affected countries have had their central banks come forward with stimulus measures and rate slashing to help support the economy through this troubling time. However, at last week’s meeting of the European Central Bank, the ECB announced some stimulus without cutting rates any further, which in the eyes of investors is not enough. Thus, due to the perceived inaction of the ECB, many expect that economic growth in the eurozone will be severely hampered by the Covid-19 pandemic, which will continue weakening the euro.
The current situation with the US is quite interesting, and to a certain extent, the opposite of the euro’s. The Federal Reserve already implemented a .5% cut to rates without even holding a regular meeting, and later announced a massive monetary injection to ensure liquidity remains high during the coronavirus crisis. What is more, investors expect that at the Fed’s March 18 policy meeting, the central bank will cut rates even more aggressively, by up to 1%, bringing them down to the 0.00%-0.25% range, the lowest they have been in years. Normally, a dovish policy results in a weak currency. Contrary to that theory, the US dollar is strengthening on dovishness because the Fed gives investors confidence that the US economy will survive the Covid-19 outbreak with minimum damage. The USD is once more the most preferred safety asset on the market.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1141, with the price currently trading above it. The daily support levels lie at 1.1082 and 1.1005. The daily resistances are located at 1.1218 and 1.1277. The indicators of technical analysis are a little mixed today, but lean towards recommending a buy position.
