Analytics By Fibo Group

Trading Discussion
61

The Federal Reserve just pledged asset purchases with no limit to support markets

The Fed announced an “endless” quantitative easing to support the economy. The markets soared up.

The press release includes a lot of incentives.
We’re giving you a short summary. In our opinion, there are only two most important points:

  1. Unlimited QE in relation to government bonds and mortgage securities agencies.
  2. Repurchase of corporate bonds and various measures of credit support to companies in the amount of $300 billion.
    The second point is very important, since it is corporate debts that are now in a severe stress and demonstrate a crushing collapse.
    The markets are trying to stabilize on this news.
    How long will it last? Share your opinion in the comments!

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62

Fed Official Warns of 30% Unemployment

The US government has reconsidered the forecast for the number of unemployed in the United States. This Thursday, an increase in the number of unemployed is expected to reach one million at a rate of 220 thousand per week over the past 3-5 years …
American businesses are closed nationwide. This could provoke a halving of GDP growth in the next three months and pull the dollar even higher.

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63

The dollar is falling due to Fed stimulus measures

  • The dollar fell on Tuesday: tough financing conditions eased somewhat after the US Federal Reserve did its best to provide much-needed dollar liquidity.

  • On Monday, the Fed announced unlimited quantitative easing and credit market support programs in a decisive attempt to support an economy struggling with extreme trade restrictions to fight coronavirus.

We can confidently say that we are out of the phase when all assets (stocks, bonds and gold) were sold. Now the situation resembles a controlled fall.

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64

Market Watch

The calm after the storm

The situation in the financial markets is stabilizing, but is seen as only a temporary phenomenon, since most countries still cannot control the spread of the virus. Currently, Europe and the United States are forced to keep the population at home, thereby putting added pressure on their own economies which results in an overall weakness in the global economy.
Currently, main topic is the intention of the US government to allocate about $ 2 trillion to save the economy. This stimulus package provides for business financing, as well as direct financial assistance to the population. According to data published by Reuters in the United States, about 100 million people are forced to stay at home due to quarantine, which is almost a third of the total population.
Pay attention to the US stock market, most of the shares returned to the green zone, since the allocation of interest-free loans will allow companies to significantly improve the current state of affairs, including restructuring their financial obligations, as well as redeeming their own shares at lower prices (at a market price that is currently significantly below the average for the last 12 months).
At the same time, I will draw your attention to the weakening of the US dollar, which has occurred over the last few days against most currencies. So, for example, the GBP / USD currency pair has already overcome the technical resistance area 1.1880–1.1900, thereby opening the way to the psychological and at the same time technical resistance level 1.2000.
I also draw attention to the publication of a weaker than expected report regarding business conditions, as well as the current situation and economic expectations in Germany from IFO. Despite data coming in below expectations, the demand for the EUR / USD pair remains stable which probably has more to do with USD weakness. Nevertheless, active purchases of EUR / USD should remain subdued until the signing of the bill to provide financial assistance in the United States, which is likely to exert strong, but short-term pressure on the USD.
Since most countries of the world are still in quarantine, long-term purchases of stock indices remain at risk.

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65

WHO: United States could become coronavirus epicenter

New cases of coronavirus infection are observed in the United States.

Representatives of some US states and municipalities criticize the federal government for the lack of coordinated action that provokes local competition for medical equipment. This was reported by Reuters, noting that the existence of the problem was recognized by Donald Trump.

  • “The world market for face masks and ventilators is crazy,” the President of the United States tweeted. “We’re helping states get equipment, but it’s not easy.”

85% of the new cases of coronavirus observed in the last day were recorded in Europe and the United States (with 40% of this number in the states).

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66

Germany: recession begins

  • IFO business climate index collapses from 96 to 86.1 points in March

  • Assessment of the current situation failed from 99 to 93

  • Business expectations collapsed from 93.1 to 79.7

These figures were slightly worse than forecasts.

The IFO index is close to the minimum values of the previous crisis in 2008/2009 - then it fell to 80.0 (in March 2009). The assessment of the current situation was weaker, while expectations were already starting to improve.
The current assessment of the situation is still quite high, and this shows that the economy is most likely far from the bottom point. The recession is likely to intensify in the coming months.

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67

G20: Americans want to put pressure on Saudi Arabia at the summit

USA intends to put pressure on Saudi Arabia on the kingdom’s planned increase in oil production during the G20 summit scheduled on Thursday, which will be held via videoconference. This was reported on Wednesday by the Wall Street Journal, citing sources.

G20 leaders intend to discuss the spread of coronavirus, but USA also plans to raise the theme of the need to end the price war, which adversely affects US companies and banks. In particular, the United States wants to warn Saudi Arabia that the kingdom could also suffer if Western financial systems are destabilized.

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68

Yes, the whole world is shaking now, somewhere more, somewhere less, but still the situation is quite heated, and on the charts it is more noticeable than ever. Now you just need to be a little more careful, because speculation is not a rarity.

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69

Even a Saudi-Russia Truce Would Be Too Late to Save OPEC+ Legacy

On Thursday, the States held an urgent teleconference between leaders of the G-10 countries to discuss how to encourage the Saudis to make peace with the Russians.

Even if President Donald Trump could resolve the conflict between the two exporters, the kingdom had already committed to flood the crude oil market next month. And Moscow in every possible way makes it clear that it will not work. The ceasefire would stop a further collapse in prices, but it is too late to save relations between the former partners, who, until this month, together supported the oil market in a state of equilibrium.

Back in 2016, when Saudi Arabia and Russia led the global alliance of oil-producing countries, known as OPEC, the main motive for cooperation was the desire to reduce the oversupply of 300 million barrels of oil in industrialized countries, which prevented price increases.

But now the kingdom is pumping oil at full strength, producing 12 million barrels a day, and demand is falling due to the coronavirus. Goldman Sachs Group Inc estimates that stocks will rise 20 million barrels per day next month.

Even assuming that storage tanks are capable of holding such a volume, everything OPEC+ has achieved in recent years of casualties and reductions will be destroyed in one month.

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70

Market Watch

Another 3.3 million unemployed in the USA

A crisis is a time of rapid and fairly strong changes not only in the economy, but also amongst the population as panic sets in. Last week, the main talk was the significant deterioration in the economic situation in Europe, which put pressure on European currencies. Investors also began a massive exodus from all stock markets.
At this point, the US dollar and US government bonds were in great demand, generating a 10 % spike in the US dollar index and causing it to rise to the highest level since 2016. Investor sentiment has changed so far this week causing a pullback in the US currency
The main reason for the weakening of the USD remains investors’ expectations of a record package of monetary stimulus from the Fed and the US government, a bearish fundamental factor for the USD and at the same time bullish for the stock market. A big jump in the number of initial applications for unemployment benefits in the United States only increases the likelihood of further stimulation of the economy.
Let me remind you that the number of initial applications for unemployment benefits approached the mark of 3.3 million with an average of about 200 thousand.
I will draw your attention to the EUR / USD currency pair. Buyers managed to overcome the resistance area of 1.1040–1.1065, but by the middle of the European trading session, the pair had adjusted to the psychological mark of 1.1000. This indicates a lack of buyers and for now a pause for any further gains in the dollar
Turning to the current situation in Europe,it is clear that the pessimistic situation in Italy, Spain and France is continuing as they still cannot stop the spread of the virus which may keep the Euro under pressure
I will also point out the GBP / USD currency pair - a breakdown of support at 1.2140 can cause a fairly strong wave of sales, returning the pair to 1.2000. The risk of a bearish scenario developing remains elevated, as there are still no bullish fundamental factors for the GBP, and the recent growth in the currency can be attributed to USD weakness.
I will conclude with a review of the transaction for the sale of the USD / JPY currency pair. After the breakdown of the technical support level at 110.50 the trader opened a full lot sell order. A Take Profit order was placed at the next support level of 109.50. As you can see now, the pair has fallen much further, thereby allowing the trader to earn a little more than $ 900. At the same time, the risk was less than $ 300, since the Stop Loss order was placed 25 points above the transaction opening price.

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71

Coronavirus: a huge debt crisis in Europe

In 2012, at the height of Italy’s sovereign debt crisis, Mario Draghi saved the euro by saying that the European Central Bank (ECB) would do everything possible to save the euro. Today, when Italy is at the epicenter of the coronavirus pandemic, the strength of the euro will again be tested by the full-blown Italian crisis.

We can assume that for the sake of the Italian and world economy and despite the high financial costs, Europe will have the political will to do everything possible to save the euro. So we are waiting for the repetition of the scripts.

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72

Good reviews, and although you pay attention only to the key positions, on the other hand, it will be useful for a wider range of traders, because even those who prefer technical analysis still pay attention to such events, and it is simply impossible to ignore them…;

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74

This week, the OPEC+ agreement will cease to exist, while the world continues to fight the coronavirus

Starting April 1, OPEC and its former allies will be free from obligations to reduce oil production. A number of large manufacturers have already announced their intention to increase supplies, but the coronavirus may make adjustments to their plans. Global oil demand is in free fall, and storage will soon be full.

Weekly Calendar:
03/30/2020, Monday

  • Meeting of finance ministers on the use of stabilization measures
    03/31/2020, Tuesday
  • #PMI manufacturing industries in China
  • March EU #inflation
    04/01/2020, Wednesday
  • The cessation of the existence of OPEC +
  • #NonFarmPayroll US labor market preliminary data
  • US Crude Oil Reserves
  • #unemployment in February, forecast 7,4%
    04/02/2020, Thursday
  • US #tradebalance
    05/03/2020, Friday
  • #NonFarmPayroll US labor market data

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75

China says manufacturing activity expanded in March, defying expectations of a contraction

PMI in China in March (data from the National Bureau of Statistics):
• Industry - 52.0 vs 35.7 in February
• Services sector - 52.3 vs 29.6
• Composite (industry + services) - 53.0 vs 28.9

On Tuesday China announced that its official Purchasing Manager’s Index for March was 52.0, which exceeded expectations for an economy affected by the outbreak of coronavirus. The growth is significant after the disastrous data from February (February PMI of China - 35.7).

This only means that most companies, indeed, resumed their work. But it is obvious that Chinese business is now facing a serious collapse in external demand due to quarantines in the United States and Europe. Therefore, a return to the normal level of economic activity seems to be very smooth.

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76

Fed will launch a new credit line for foreign central banks

The repo mechanism for foreign central banks will be launched on April 6, and its duration will be at least 6 months.

The Fed has already launched a number of programs to provide dollar loans at close to zero interest rates to other central banks for up to 84 days to ensure sufficient dollar liquidity outside the United States.

Earlier this month, the Fed reopened swap lines with five central banks in Canada, Japan and Europe, and began to provide loans of up to $60 billion to regulators in Australia, Brazil, Mexico and six other countries.

Many business transactions in the world are carried out in dollars, while international organizations issue dollar loans. The swap lines were actively used by the Fed in 2008 and 2009.

The Fed’s scale of action surpasses all that the regulator did during the 2008 global financial crisis and the debt crisis in the eurozone 2011-2012, since now dollar financing is available to a much larger number of central banks in developing economies.

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77

OPEC oil output only rises by 90,000 bpd in March

According to Reuters estimates, OPEC oil production changed slightly in March - an increase of 90 thousand bps.

The main contribution was made by Saudi Arabia (+100 thousand bpd), Iraq (+40 thousand bpd), United Arab Emirates (+60 thousand bpd), Nigeria (+30 thousand bpd), Angola (+20 thousand bpd).
The decline in production continued in Iran (-70 thousand bpd), Libya (-45 thousand bpd), Venezuela (-40 thousand bpd).
As we all recall, the agreement on the limitation of production under the OPEC+ transaction has ceased to be effective from today.

On the first day of April, when the OPEC+ restrictions ceased to apply, Saudi Arabia began to fulfill the promise to increase oil supplies to the market, however, a number of tankers leave Saudi ports with oil without their final destination (which once again confirms that the oil wars actually occur in verbal form (in the media)).

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78

PMI: Is business activity growing?

The global PMI, which characterizes the business environment in world industry, rose from 47.1 to 47.6 points in March. Formally, this allows us to speak of a slowdown in the recession, but, in fact, the entire growth of the index was exclusively associated with China, while in all other countries the recession sharply intensified.

:us: US PMI fell to 48.5 in March, compared with 50.7 in February.

:uk:UK PMI fell to a three-month low of 47.8, compared with 51.7 in February.

:eu:Eurozone PMI fell to 44.5 in March, the lowest in 92 months, from 49.2 in February.

:jp: Japan’s PMI slowed the fastest after the 2011 tsunami - fell to 44.8 in March, compared with 47.8 in February.

What we are witnessing is a global industrial recession, and in April its scale is likely to increase amid the introduction of quarantines in a wide range of countries.

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79

US Unemployment: new records

For the week, 6.648 million people applied for unemployment benefits in the United States - 30 times more than in ordinary weeks. A week earlier - 3.283 million.

Ministry of Labor data provide insights into the severity of the economic crisis caused by the coronavirus pandemic. The COVID-19 outbreak led to the freezing of a large part of the economy in the United States and in dozens of other countries of the world.

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80

Global cost of coronavirus may reach $4.1 trillion

The cost of damage caused by the coronavirus pandemic can reach $4.1 trillion, or almost 5% of the global gross domestic product, depending on the spread of the disease in Europe, the United States and other large economies, the Asian Development Bank said.

A shorter containment period could limit the damage to $2 trillion, or 2.3% of world production. Developing countries in the Asian region, including China, will account for 36% of the total cost of the pandemic.

Meanwhile, on March 6, ADB believed that a virus outbreak would cost the world economy $347 billion, and growth rates would decline by as much as 0.4%. Since then, the epicenter of the epidemic has shifted from China to Europe and the United States, with the number of reported cases currently exceeding 1 million.

ADB lowered its growth forecast for Asia in 2020 from 5.5% to 2.2% last September. The forecast for China has been reduced from 6% to 2.3%. For comparison: last year, the country’s economy grew by 6.1%. According to the report, this year there will be weak growth in all sub-regions of developing countries in Asia.

Countries dependent on tourism and raw materials, including Thailand, will suffer the most from the pandemic. If the epidemic can be stopped within three to six months, the economy will recover faster.

Inflation is likely to accelerate due to rising food prices, even despite declining economic activity; but low commodity prices will help smooth out price hikes, the ADB report said.

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81

:fire:Market Watch​:fire:

:boom:Incredible rally in the oil market​:boom:

We conclude the week with the issues surrounding financial markets which of course is a, lack of liquidity and, as a result, panic.
I will begin today’s review with an event that occurred on Wednesday, April 1. Just before the opening of the American trading session which is also the end of the trading session in London, we observed incredibly strong growth of the AUD throughout the market. It is worth noting that the growth of the AUD/USD pair, which exceeded 130 points, lasted only 5 minutes, and over the next 5 minutes, the currency was sold off and more than half of the gains were lost.

Given the nature of the price movement, I can assume that the reason is the lack of liquidity at the time of opening of one trading session while the other session was closing
Another strange factor this week was the sudden rise in oil prices. We are talking about a record daily growth in the price of American WTI grade oil, which exceeded 30%. At the same time, a significant part of the upward movement occurred in less than an hour and exceeded $ 5. In this case, the driver of such a rally was Donald Trump’s statement where he is confident that Russia and Saudi Arabia will reduce oil production by 10 million barrels, and possibly more.

Since this is almost half of the total production by these countries, the likelihood of such a scenario is slim. Accordingly, I assume that we are talking not only about Russia and Saudi Arabia, but about the whole OPEC cartel and its allies, which produce more than 40 million barrels per day. Given the current oversupply of oil, which is already estimated at 35%, I believe that OPEC+ will find a compromise to support the oil market and its own economies.
Moving to the American trading session, I will draw your attention to the upcoming publication of the latest labor market statistics. Given the disastrous figures on the initial applications for unemployment benefits, there is a risk the latest figures will be below analysts’ expectations and I expect weakness in the USD.

We will conclude this issue with an overview of the EUR/USD currency pair.
After a false breakdown of resistance at 1.0950, it was decided to open a short position when retesting this level. A Stop Loss was set at the previous maximum, and A Take Profit at 1.0850. As we can see now, the pair collapsed under the psychological level of 1.0800, which allowed the trader to earn $1000 with minimal risk.

The above review is not a direct guide to trading, and can only be classed as recommendations.

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