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The currency market almost froze in the face of massive incentive measures taken by the world's leading central banks led by the Federal Reserve. We have previously commented on these reasons, and today, we only recall them to understand the situation and consider possible options for the development of events.
The dynamics of major currencies is still under the influence of large-scale incentive measures taken by the Fed, the ECB, the Bank of England, the Central Bank of Japan, Switzerland and so on, which actually flood local financial systems with money, while exerting downward pressure on national currencies. But ahead of the rest is the American regulator, which has actually opened an unlimited credit line to support liquidity.
And here the question arises, why is the dollar not falling against other major currencies?
Its growth against the currencies of developing countries is clear. The reason for this is the repatriation of investor funds against the backdrop of the coronavirus pandemic from these countries to the dollar. But why is the dollar supported against major currencies? Of course, the Central Banks of the countries to which they belong carry out measures to support national economies, but they are incomparable with those unprecedented measures taken by the Federal Reserve, which means the dollar should fall, as it did at the beginning of the last decade. But this does not happen due to the fact that there is a high degree of uncertainty about the prospects for the global economy as a whole and its leaders in the USA, China and large Europe. This picture is clearly visible in the dynamics of stock markets, which are moving along the strip - rising and falling again. The dollar is perceived as the most reliable safe haven currency, being the world's reserve currency. And that means
We, as before, believe that this state of affairs will last until the situation is stabilized by the pandemic of the coronavirus in Europe, and most importantly in the United States.
As for the publication of economic statistics, they now play almost no role, since they simply confirm the forecasts of the consequences of strict quarantines in China, Europe and North America. Therefore, we do not consider the data on employment in America published today as extremely important and crucial. They can be worse or better than forecasts, the market will react locally to them, and nothing more. We believe that in general, the dynamics of the currency exchange market will remain sideways for now.
Forecast of the day:
EUR/USD is trading above the level of 1.0820. The pressure on the pair has a wide demand for the dollar as a reserve currency. We believe that the data on US employment published today will lead to an increase in limited volatility in the currency markets. At this wave, the pair may rise to the level of 1.0950, and then fall again to the level of 1.0820 with the prospect of continued decline to 1.0740 if it does not hold above this level.
Spot gold quotes are consolidating below the trend line at the level of 1620.50. If it holds and the pair falls below the level of 1606.00, it will have the opportunity to fall to 1575.25.
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