• Europe needs 500 billion more from financial institutions above the one trillion agreed upon package.
  • It is essential to rethink European funds by having an open mind regarding the institutions and new instruments.

The coronavirus has brought the global economy to its knees and Europe has not be spared. According to Reuters, European Union financial institutions will have to release 500 billion euros in order to put the economy in recovery in addition to the already agreed upon one trillion euros package. Reuters quoted European Stability Mechanism Managing Director Klaus Regling who was in an interview with Italy’s Corriere della Sera paper. The paper wrote:

I would say that for the second phase we need at least another 500 billion euros from the European institutions, but it could be more.

Regling continued:

“For that, we need to discuss new instruments with an open mind, but also use the existing institutions, because it is easier, including in particular the Commission and the EU budget. Rethinking European funds can go a long way in keeping the European Union together,”

After surging to $1,742 – the highest in seven years – gold prices suffered a downside correction and ended the post-Easter week close to where it started it. How is the precious metal positioned now?  

The Technical Confluences Indicator is showing that XAU/USD has robust support at $1,682, which is the convergence of the Simple Moving Average 10-one-day, the previous 4h-low, and the Bollinger Band 4h-Lower. 

It is followed by $1,680, which is the previous daily low. 

The initial upside target is $1,688, where the SMA 10-1h, the Fibonacci 23.6% one-day, and the SMA 50-15m meet up.

The next target is $1,695, which is the confluence of the Fibonacci 38.2% one-day and the BB 1h-Middle.

Here is how it looks on the tool:

Confluence Detector

The Confluence Detector finds exciting opportunities using Technical Confluences. The TC is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.

This tool assigns a certain amount of “weight” to each indicator, and this “weight” can influence adjacents price levels. These weightings mean that one price level without any indicator or moving average but under the influence of two “strongly weighted” levels accumulate more resistance than their neighbors. In these cases, the tool signals resistance in apparently empty areas.

Learn more about Technical Confluence

  • EUR/USD bounces on Friday and remains confined within range. 
  • Immediate resistance can emerge near 1.0845 and 1.0920 levels. 

  

EUR/USD daily chart 

 
EUR/USD is trading below the main SMAs on the daily chart as the spot rebounds modestly before reaching the 1.0800 figure.  
 

EUR/USD four-hour chart

 

The fiber is trading below the main SMAs on the four-hour chart suggesting a bearish bias in the medium term. However, the quote bounced near the 1.0800 figure and challenged the 1.0884 resistance. A daily close above the mentioned level can yield further strength towards the 1.0920 and 1.0970 resistance levels, according to the Technical Confluences Indicator. On the flip side, immediate support can be expected near the 1.0845 and 1.0820 levels
 
 
Resistance: 1.0884, 1.0920, 1.0970
Support: 1.0845, 1.0820, 1.0800
 

 

Additional key levels

 

  • EUR/USD bounces on Friday and remains confined within range. 
  • Immediate resistance can emerge near 1.0845 and 1.0920 levels. 

  

EUR/USD daily chart 

 
EUR/USD is trading below the main SMAs on the daily chart as the spot rebounds modestly before reaching the 1.0800 figure.  
 

EUR/USD four-hour chart

 

The fiber is trading below the main SMAs on the four-hour chart suggesting a bearish bias in the medium term. However, the quote bounced near the 1.0800 figure and challenged the 1.0884 resistance. A daily close above the mentioned level can yield further strength towards the 1.0920 and 1.0970 resistance levels, according to the Technical Confluences Indicator. On the flip side, immediate support can be expected near the 1.0845 and 1.0820 levels
 
 
Resistance: 1.0884, 1.0920, 1.0970
Support: 1.0845, 1.0820, 1.0800
 

 

Additional key levels

 

  • US dollar index (DXY) ends the week mixed below the 100.00 mark.
  • The level to beat for bulls is the 100 resistance. 
 

DXY daily chart

 
DXY is trading above the main SMAs on the daily chart on track to end the week below the 100.00 mark.  

DXY four-hour chart

 
DXY retreats within range while trading above the main SMAs on the four-hour chart. The bull trend remains intact suggesting that next week the greenback can have a retest of the 100 figure with the potential of a break above it opening the door to further advances toward the 100.50 and 101.00 price levels. Support is expected to hold near 99.60, 99.25 and 98.85 levels. 
 

Additional key levels

 

  • US dollar index (DXY) ends the week mixed below the 100.00 mark.
  • The level to beat for bulls is the 100 resistance. 
 

DXY daily chart

 
DXY is trading above the main SMAs on the daily chart on track to end the week below the 100.00 mark.  

DXY four-hour chart

 
DXY retreats within range while trading above the main SMAs on the four-hour chart. The bull trend remains intact suggesting that next week the greenback can have a retest of the 100 figure with the potential of a break above it opening the door to further advances toward the 100.50 and 101.00 price levels. Support is expected to hold near 99.60, 99.25 and 98.85 levels. 
 

Additional key levels

 

Analysts at the National Bank of Canada take a look at next’s week key economic numbers to be released in Canada and in the US. 

Key Quotes:

“In Canada, a lot of attention will be on March’s consumer price index. A sharp drop in gasoline prices (-19%) during the month could have translated into a 0.4% decline of the headline index before seasonal adjustment (-0.6% after seasonal adjustment). This weak monthly print should lead to a sharp drop in the annual inflation rate, from 2.2% to 1.1% (a negative base effect will also play a role in that decline). We expect the annual rate of CPI-common to remain unchanged at 1.8%. We’ll also get February’s retail sales report. Auto sales may have fell a bit in the month following a strong showing in January, but this decline may have been more than offset by gains in other categories, notably gasoline stations (on account of rising pump prices) and electronics. As such, we expect total sales to have increased 0.2%. Outlays on items other than motor vehicles, for their part, may have grown a more convincing 0.4%. We’ll also keep an eye on the release of wholesale trade sales for February.”

“In the US, the first effects of the coronavirus will certainly be visible in a host of March indicators due to be released this week. Sales of newly-built and existing homes surely retreated in the month but we’ll probably have to wait until April’s data become available to get a better sense of the damage being done in the real estate sector. Durable goods orders, meanwhile, will have suffered badly judging from previously-released indicators such as the Empire and Philly Fed surveys and the ISM Manufacturing Index. In other news, Markit’s flash composite PMI will probably show one of the sharpest (if not the sharpest) monthly drop in private-sector activity in April. As has been the case in recent weeks, the publication of data on initial jobless claims (a timely indicator of the labour market) will attract a lot of attention.”

According to analysts from Danske Bank, the USD/JPY PY have been thrown back and forth by moves in global risk aversion, commodities and domestic fiscal response on the one side (stronger JPY), but also a very weak domestic economy and recently a global stabilisation in risk sentiment (weaker JPY). Looking ahead, they see the second half of the year as the time when USD/JPY could move slightly higher as they expect an economic rebound during the fourth quarter. 

Key Quotes: 

“Our PPP estimate is around 80, i.e. suggesting an undervalued JPY, while our medium term valuation model (MEVA) stands at 108. In our view, USD/JPY is at fair value.”

“Drivers set to take JPY above 110 are likely to relate to a further stabilisation of the business cycle. Events that could take JPY towards 105 again include declining commodity prices, or further deterioration of expectations to global demand. The key event to take USD/JPY lower would likely be a substantial widening of credit spreads, a correction in US equity markets or re-emerging fears related to shutdowns and coronavirus.”

“We continue to expect 112 in 6M and 12M (unchanged), which still reflects our view of a strong USD. EUR/JPY has started to struggle in recent month(s), driven primarily on the back of a declining EUR. This may indeed continue to be the case in the coming months. Near term, we see USD/JPY as trading in 107-110 range.”
 

Analysts at Wells Fargo look for the global economy to contract 2.9% in 2020. They point out the key source of concern for the global economy has shifted to the services sector.    

Key Quotes: 

“The key source of concern for the global economy has shifted to the services sector from the manufacturing sector. One of the most notable themes of 2019 was a relatively solid consumer and services sector (helped by solid employment and wage growth not only in the U.S., but also other major economies including the Eurozone, United Kingdom and Canada, among others). In contrast, industrial output was under pressure for large parts of last year, with persistent global trade tensions weighing on activity.”

“Given the extent of the economic shocks, we now see the global economy entering recession in the first half of this year and expect global GDP to contract by 2.9% in 2020, though we do expect global markets and economic activity to stabilize by late this year.”

“With most major and emerging economies set to fall into recession in 2020, monetary and fiscal policymakers have responded with aggressive stimulus measures. Despite these efforts, we doubt they will be enough to help these economies avoid a deep slump in growth in the near term.”

“Policy responses are impressive and important, and are likely a contributing factor to some recovery in global equities from their recent lows, while they should also lead to an eventual  stabilization in global economic activity—both developments that are important for the currency market outlook. However, given the size of the COVID-19 virus shock we think it is very unlikely these policy measures will be enough to help these economies avoid a sharp contraction in the near-term. As a result we have made some further significant downward revisions to our international growth outlook and now see 2020 GDP declines of 5.5% for the Eurozone, 5.4% for Japan, 4.9% for the United Kingdom and 5.7% for Canada.

According to analysts from Danske Bank, the USD/CAD pair will move to the downside over the next months. They forecast it will trade at 1.37 in six months (revised higher from 1.35). 

Key Quotes: 

“Given the oil heavy nature of the Canadian economy, CAD has – like other oil currencies – been heavily hit by the double whammy of both COVID-19 and the oil price war. COVID-19 figures show similarities to the US and have improved recently, but risks are for a larger economic setback than previously assumed. Bank of Canada (BoC) has reacted strongly by cutting rates by 150bp to a level that the central bank deems the lower boundary.”

“The BoC has also launched asset purchase programs in government, provincial and corporate bonds. Looking forward, the CAD’s direction will be determined by how fast both the global economy gets up and running, and by how oil prices, products and global asset markets recover. In our base case, we pencil in a stronger CAD. According to CFTC IMM data, speculative CAD positioning remains borderline stretched short.”

“We forecast USD/CAD at 1.40 in 1M (from 1.43), 1.38 (unchanged) in 3M, 1.37 in 6M (1.35) and 1.35 in 12M (1.28).”