26.03.202008:38 Forex Analysis & Reviews: EUR/USD: The optimism of the bulls may quickly turn into a new wave of sales of risky assets

The euro continued to strengthen against the dollar, after it became known that the US Senate approved the $2 trillion package of measures to stimulate the economy. It contains payment for unemployment benefits to households, as well as loans that will help smooth the economic shock caused by the coronavirus. Immediately after the approval, US President Donald Trump announced that he is ready to immediately sign the law on new stimulus measures.

The bill will most likely help smooth the consequences of the crisis, and give a positive impact on the US stock market, which was in a steep downward peak this month.

During his speech yesterday, the President of the Federal Reserve Bank of St. Louis, James Bullard, said that the US economy may demonstrate a strong recovery, but much will depend on the strength of the destruction caused by the coronavirus pandemic. Bullard noted that the Fed has already done a lot, so now, it remains to see whether its efforts will bring positive results. If necessary, the Committee can do more, but the next steps have not yet been discussed. As for inflation, Bullard expects the indicator to be at a fairly volatile level, but the risk of deflation, according to his forecast, is excluded.

Anyhow, buyers of risky assets have already taken advantage of the good news, causing the euro and the pound to strengthen this week. Although the euro reached 1.0930 today, it is quite difficult to expect the further strengthening of risky assets, as the negative fundamental statistics that we will see next month will certainly lead to another strengthening of the dollar.

The report on the orders for durable goods in the United States in February this year was released yesterday. Due to the increased demand for transport equipment, the index increased by 1.2%, while economists forecasted a 0.5% decline.

Meanwhile, the Mortgage Bankers Association of the United States reported a sharp drop in the market index, saying that for the week of March 14-20, it fell by 29.4%, from 1074 points to 758.4 points.

As for the current technical picture of EUR/USD, it is likely that the bulls will try to continue pushing the euro upwards, up to 1.0975 and 1.1040. Thus, I expect major players to return to the market from these levels, but problems with growth may start after the pair returns to 1.0790. Nevertheless, do not rush in opening short positions against the upward correction, as it is best to wait for the moment when the bulls will not be able to update the daily highs.