Forex today: Daily analysis

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428

The assets wrap: the best, the worst, and the most volatile

Check the charts: Updates on the best and the worst performing assets for the last week

24.02.2020

Another week was full of coronavirus fears, which moved the markets a lot. Let’s consider the best and the worst-performing assets as Monday’s session kicks in.
The best performers

Among the best-performing currency pairs, we need to highlight the USD/BRL pair. The USD strengthened against the Brazilian real by nearly 950 pips within one week, closing at the all-time-high of 4.3959. The poor Brazilian retail data published on Wednesday and the risk-off sentiment weakened the Brazilian real against the US dollar. If the pair reverses, it’s recommended to pay attention to the 4.3 level.

If you are a trader of major currency pairs, look at USD/JPY. The pair rose from the 109.85 level towards the resistance at 112.1. If the USD continues strengthening this week, bulls will break the 112.1 level and target the next resistance at 112.85. On the downside, there is a strong support level at 109.72.

Among commodities, the safe-haven gold, as well as palladium, was the main gainer. The price for gold rose from $1,582 to $1,584 last week and has opened with a gap up today, moving even higher to the $1,690 level. The next key resistance will be placed at the highs of November 2012 at $1,730. In case of a risk-on sentiment, wait for the reversal to $1,567.5.

As for palladium, the price for this metal jumped by $385.5 and reached an all-time high at $2,829. The key support level for bears lies at $2,247.

The worst performers

Of course, the Australian and the New Zealand dollars faced pressure amid the risk aversion. The AUD/USD pair was going down and tested the levels below the 0.6618. The next support for the pair lies at 0.6443. Bulls need to push the pair above the 0.6618 level in order to reach the 0.68 level faster.

The kiwi was down by 143 pips last week, moving lower t the support at 0.6284. If this level is broken, the next support will lie at 0.6155.

Also, GBP/USD was among the weakest pairs last week. It fell from the opening price of 1.3034 to the lows at 1.2848. The closest support lies at 1.2832. The next one will be placed at 1.2726. The upside momentum will be limited by the 1.3053 level.

The award for the most volatile pairs go also to exotics: USD/MXN and USD/TRY showed some sharp moves last week.

What will be the key movers this week?

Follow the news, check the economic calendar and watch the movement of the assets traded on our platform!

429

Important events on March 2-6

More at: Weekly news: market updates

28.02.2020

Will the pandemic be confirmed?

After the heavy selloff last week amid the coronavirus fears, next week is going to be interesting to look at. As the number of cases around the world continues rising, investors keep selling the risky assets and buying safe-havens such as the Japanese yen. We may expect more news, more cases and, probably, more damage to the markets. In case of lighter data, the risk sentiment will recover.
Reserve bank of Australia will publish the statement

The Reserve bank of Australia will release its rate statement on March 3 at 5:30 MT time. The market expects the bank to keep its interest rate on hold at 0.75%. At the same time, it may acknowledge the risks from the coronavirus, which directly hurt its main trade partner – China, and has been already spread globally. If the bank provides a dovish outlook, the Australian dollar will fall to the lows of the 2008 crisis. In case of an alternative scenario, the AUD will strengthen.
Will we see a rate cut by the Bank of Canada?

The Bank of Canada will be the second major central bank to conduct a meeting next week. The meeting is expected on Wednesday at 17:00 MT time. Coronavirus made the overnight index swaps market pricing in a 61% chance of a rate cut. At the moment, the interest rate is held at 1.75%. The rate cut will make the Canadian dollar vulnerable to a further fall. Let’s not forget that the commodity-linked currency is affected by the coronavirus fears and the weakening of the oil prices. On the other hand, hawkish comments will push the Canadian dollar up.
NFP week

The United States will release the level of non-farm employment change alongside with average hourly earnings and an unemployment rate on Friday at 15:30 MT time. The forecasts are optimistic: analysts anticipate the NFP to advance by 185K, average hourly earnings to increase by 0.3%, and the unemployment change to reach 3.5% - down from the 3.6% previously. Better-than-expected figures will push the US dollar higher.
OPEC urgent meeting

Next Thursday the countries of OPEC will hold an extraordinary meeting in Vienna. They will decide on further cuts of oil output amid the weak oil prices.

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Analysts: how about $20 for Brent oil?

Check more: What do bank analysts forecast for oil?

10.03.2020

Oil market crashed after OPEC+ didn’t agree on production cuts. Brent slid as low as to $31.27 a barrel. WTI hit $27.34 a barrel. Both benchmarks haven’t really started to close this week’s bearish gap. What’s next? Let’s see what bank analysts have to say about this.

BNP Paribas

There will be more volatility in oil prices in the next two weeks as that is when the OPEC’s cuts agreement officially ends. The odds are that during this time oil will remain under pressure. What is happening between Saudi Arabia and Russia is a high-stakes poker game.

MUFG

Traders should be ready for prices staying below $30 a barrel in the second quarter of 2020. The commodity’s price has no support on the downside and may fall below $25 a barrel. Models now forecast quarter-end 2020 levels for Q1, Q2, Q3 and Q4 2020 at $28.6 a barrel, $32.3/b, $35.6/b and $46.1/b, respectively.

Bank of America

Brent oil may temporarily fall to $20 a barrel range over the coming weeks as there’s a big shift in Saudi’s approach: the country has started giving discounts and will probably allow inventories to build.

Citigroup

There’s a unique combination of demand and supply shocks that could send prices into the $20s.

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Gold price has dropped

More at: Gold price has declined

12.03.2020

What happened?

Gold has been falling since the start of the week. Despite the increase of the coronavirus fears, the precious metal – a well-known safe haven – depreciated. XAU/USD reversed down from the $1,700 area and dropped to $1,586 at the moment of writing (March 12, 16:00 MT time).
What are the reasons?

The primary reason of gold’s depreciation is technical correction. Earlier the price has risen to the highest levels since 2012, and that was simply too much too fast, so buyers took profit. The previous candlestick on the monthly chart looks very similar to the one currently forming at that timeframe. February’s candlestick has a big upper wick. This means that the price met resistance and wasn’t able to keep going up.

What’s next?

The natural question now is, “Will gold keep falling?”

The answer is, “Yes, the price may visit lower levels”. On the W1, there’s bearish divergence between the price and the Awesome Oscillator. A weekly close below $1,590 will produce a bearish engulfing pattern on the W1. Support is located at $1,557 (September highs) and 1,535 (100-day MA). The next key level on the downside will be at $1,500. Resistance is at $1,600 and $1,650.

Fundamentally, the reasons for higher gold prices are still here: the coronavirus uncertainty, the easing of monetary policy of large central banks. As a result, watch technical levels. If the signs of reversal to the upside appear at the mentioned support levels, consider bullish positions.

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BOE rate cut: what’s next for the GBP?

Check more: The GBP: definitely going to move further today

11.03.2020
What?

Today, the Bank of England made an emergency cut of its interest rate. The regulator shifted the interest rate by 50 basis points to 0.25%. The action was driven by a slowdown of the British GDP growth for January (0% vs. 0.2% expected) and the global uncertainties amid the coronavirus outbreak.

UK GDP growth rate

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Source: Trading economics

But there is some optimistic news as well. During the press conference, the BOE governor acknowledged the economic shock caused by the virus, but, at the same time, expressed confidence about its temporary effect. Thus, the weakness of the GBP was short-lived, as bulls took over the market on the Mr. Carney’s beliefs.

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Even though GBP/USD plunged below the 1.2864 level, buyers managed to push it higher and help it to retest the 1.2977 level.
What’s next?

If you’re the GBP trader there is no time to relax today. The upcoming UK budget update at 14:30 MT time will contain stimulus measures, which are expected to support the economy and businesses. Follow the updates, as they may have an impact on the GBP.
Time to trade on the GBP?

The market presents a wide range of opportunities today. Besides GBP/USD, take a look at the EUR/GBP. This pair may be a good choice for those who don’t want to deal with the USD volatility expected on the US inflation release at 14:30 MT time.

433

Central banks: all as one

More at: http://bit.ly/33lOOUA

16.03.2020

With emergency meetings taking place every two days, it is becoming irrelevant to anticipate outcomes of the planned economic events. For this reason, let’s just recap what happened recently and try to have a broader perspective.
Rate-cutting spree

All major central banks have already reacted to the coronavirus fallout by either cutting interest rates or announcing quantitative ease measures – or both. The map below shows what corresponds to the G-7, and note how quickly evolve in the context of the recession fears: this map from Bloomberg’s fresh (this Monday) article only leaves it to the Bank of Japan to take action on March 19 – and the Japanese financial officials have just had an emergency meeting! They left the interest rate unchanged but informed the audience on extensive quantitative ease measures, announcing their full commitment to the G-7 countries to support the level of US dollar liquidity in line with their overseas colleagues.

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Any ace up the sleeve?

Quite controversially, the fact the financial authorities reacted to the coronavirus fallout comes with little consolation. Most of the banks have already fired most of the available artillery at the recession risks. That means, there is very little monetary financial capacity left for the financial authorities of the strongest countries – if any. And that’s while the coronavirus has just started its march into the countries of the most developed and wealthy part of the globe. It appears that the true fight for the global economy will be a test for lengthy economic resilience, and there is normally little chance left for a combatant who fires most available ammunitions at the first strike.
What next?

The US President, a strategic supporter of low domestic interest rate, finally expressed his joy seeing the US Fed cutting the rate to the target range of 0-0.25%. Was Wall Street happy as well? Barely so. Most observers either called for more stimulus or blamed the Fed for panicking and bringing even more run-for-your-life mood into the investors’ circles. Obviously, we are yet to see how the situation around the coronavirus develops, but the currently, financial circles prefer a cautiously modest economic view of the nearest future. Most of the media prefer to view the situation as multi-alternative and restrain from direct predictions. In the meantime, Goldman Sachs sees S&P dropping to 2000 as one of the scenarios. Currently, it is at 2666, which is 21% lower than its recently left all-time high of 3400. So let hope for the best, prepare for the worst, and use the opportunities we have now!

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Australian job data: the ray of hope for the AUD

More at: http://bit.ly/2WkmvVa

17.03.2020

Australia will publish an update on employment figures on March 19, at 2:30 MT time.

Instruments to trade: AUD/USD, AUD/JPY, AUD/CHF

If you are tired of coronavirus-related news, we recommend you to take a look at the economic calendar. Some of the opportunities may not have as a big effect on the currencies as during the calm times, but traders may still take advantage out of their outcome. One of them is the employment data for Australia, which consists of employment change and the unemployment rate. The previous release was mixed: while employment change advanced by 13.5K, the unemployment rate rose to 5.3%. The reaction of the AUD was limited. What can we expect this time?

If the actual level of employment change is higher and the unemployment rate is lower than the forecasts, the AUD will strengthen;
If the actual level of employment change is lower and the unemployment rate is higher than the forecasts, the AUD will weaken.

Check the economic calendar

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435

The US Fed: salvation cometh

24.03.2020

Economy bailout

Until recently, observers were complaining that the US Fed’s financial aid was not enough to keep the American economy going at acceptable pace. Well, it seems their prayers were heard: the Fed is opening its unlimited power to the market now. Its’ aid will be literally unlimited: Jerome Powell’s team promised to buy as many government-backed bonds and mortgage-backed securities as its required to ensure the virus hit doesn’t inflict too much damage. “Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate”, the Fed stated on Monday.

Essentially, that means, while the congress keeps discussing a $2trln stimulus, the Fed steps in to finance businesses and individuals directly, extending their support much beyond critical parts of the economy. That’s about time: observers predict the inevitable recession to the US economy and job losses in the rage of 1mln due to the coronavirus.
Forex

The US dollar responded immediately, as it was supposed to just like in any other case of such a large currency influx: it eased its grip on the market. Even the weak currencies such as MXN, TRY and RUB got an opportunity to relax a bit after an unstoppable onslaught of the USD. Gold surged as well, taking back its privileges as a safe-haven commodity.

Stocks

S&P dropped to 2175 – its lowest market since 2016. But the Fed’s actions made it get back up to 2320. Observers comment that although there still is certain bearish potential, there are reasons to expect recovery over the pass. For this reason, it is a good moment to watch for the pick-up signs for a possible buy in the nearest future.

436

Euro zone suffers loss of economic activity

Check more: Euro zone business activity recession

26.03.2020

What is happening?

Economic activity in service sector in the Euro zone and the UK is on its lowest rates since 2009.

How do we now that?

On Tuesday leading indicators of economic health in France, Germany and UK were released – French, German and UK Flash Services PMI. The numbers are disappointing as they came out below the expected level. At the same time, manufacturing industries were actually doing better than economists had predicted.

These indicators show how purchasing managers assess business conditions today. With people in France, Spain and Italy confined to their homes, travel plans being abandoned, with restaurants and other entertainment places being shut down, there is no surprise that service sector is struggling today.

What does it mean?

These indicators gave a first signal that euro zone economy is tilting to recession. Governments have started to guarantee loans for small companies, help those who lose their jobs, and boost spending. However, the European lockdowns will leave a 350 billion-euro hole in household incomes and company profits.

The threat is that if the containment measures are needed a long time, the euro area will collapse. The UK economy will contract by at least 10% in the first half of the year, according to Bloomberg Economics’ estimates. The economy in euro area is forecast to shrink 3.1% in first quarter, with another blow of 2.4% in the second.

The future of euro-area economy mostly depends on the measures that governments will take. That is why right now it is quite necessary to get updated not to miss fresh news that might influence the market.

The ECB and the EUR

The European Central Bank makes all efforts to cope with the extraordinary shock that stunned the market. For this reason, it scrapped most of the bond-buying limits in its 750 billion-euro ($819 billion) pandemic emergency program.

This program will continue all this year and will also allow the ECB to buy bonds with shorter maturities.

The long-term perspective of euro will depend on its effectiveness of every member of euro zone. We will monitor the situation closely and keep you updated as always.

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Forex market update on March 30

More at: https://bit.ly/3dzC8hP

30.03.2020

To start the week, let’s throw a quick glance on the market disposition this Monday.
Forex

No big movement so far, with USD and JPY being moderately strong against their counterparts. In general, the overall mood of the market is very cautious. Very possibly, currency investors are not yet sure how to interpret Donald Trump’s recent stepping back from his previous call to resume normal activity by Easter. Now, the virus state is extended until April 30 in the US. So the audience is watching for more fundamentals on the USD to factor it into this week’s movements.

USD/JPY: support 107.00, resistance 108.50

Gold

The precious metal has lost its momentum for the upside. Currently, it trades at $1,615 per ounce and is likely to continue the consolidation at this level. As there is no certainty on the market about the nearest perspectives, and the positivity is hardly outweighing the pessimism of what’s going on, so is the gold – hanging there at the ranges of $1,610-1,620.

XAU/USD: support $1,600, resistance $1,645

Oil

The oil market is now in a “prepare for the ride” state. Most media reiterate the truth that Donald Trump lost the opportunity to lead the global oil market anywhere, and even if he wanted it now, it is too late. Saudi Arabia and Russia show no more sympathy to each other nor any more concern by the global consequences of the oil price war. These last days of March will end the current period of output limitations following the December agreements of the OPEC+, now obsolete. Hence, Wednesday will be the first day of the truly free oil market. Probably, that is going to be an example that freedom without limitations is no good for anyone. In the meantime, the oil price is at decade-long bottom levels.

WTI: support $20, resistance $28

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Is Chinese economy rebounding?

More at: https://bit.ly/2w2wfsp

31.03.2020

It seems that China may have defeated the pandemic as the coronavirus cases has dramatically fallen there. The country has come through the worst and is recovering now.

Today China Manufacturing PMI (purchasing managers’ index ) was released and it went beyond all expectations as the index was 52.0 with forecast of 44.9 while previous one was 35.7!

What does it mean for China?

It’s excellent for the Chinese yuan. Indexes above 50.0 indicate industry expansion as it’s widely assumed, but nowadays it doesn’t mean that Chinese economic activity has fully resumed. The country might avoid a recession but, anyway, will undergo a steep slowdown because of the virus shocks on production and demand. World Bank downgraded China’s 2020 GDP forecast to 2.3% versus 6.1% reported for 2019.

What does it mean for the world?

The whole world is suffering from the virus now and this shock will affect greatly almost every country as economies are all intertwined. As Michael Howell from London’s CrossBorder Capital Ltd. said, we should be ready for the turnaround of the lead economy. Who knows, maybe US dollar will cede its place to the Chinese yuan. However, this is an assumption, which may not hold up.

Technical analysis of USD/CNH

Let’s look at the USD/CNH chart. It’s now on 7.1060 mark crossing Moving Average of 50. The rebound of the Chinese PMI should strengthen the Chinese yuan. Despite that fact, we see the upward trend and the pennant, so, we can assume that, the graph should surge after it.

Chinese PMI affects Australian dollar

Moreover, the Australian dollar bounced back substantially from the Chinese PMI data. Often the Australian dollar acts as a Chinese-economy proxy bet. Moreover, 2.2 trillion dollar US stimulus package improved the global risk sentiment, what was beneficial for riskier currencies, including the aussie. However, worries about the financial downturn from the coronavirus support the US dollar’s perceived safe-haven status.

We see the AUD/USD pair on 0.6090 mark now. It almost reached 61.8% Fibonacci retracement level with 0.62300 mark and then turned back to 50%. It’s the decisive moment, will it go down breaking through 50% Fibonacci retracement level or continue its growth.

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Employment data may make the USD volatile

Check at: https://bit.ly/34dLtHA

01.04.2020

The US Non-farm payrolls, also known as NFP, will be published on April 3, at 15:30 MT time.

Instruments to trade: EUR/USD, USD/JPY, USD/CHF

The indicator represents the change in the number of employed people during the previous month excluding the farming industry. Traders pay huge attention to it, as it makes the US dollar highly volatile after the release. It’s worth mentioning that it comes out at the same time with the level of average hourly earnings and the unemployment rate. In March, the level of non-farm payrolls greatly outperformed the forecasts with 273K (vs. 175K). The average hourly earnings came out in line with expectations of 0.3% and the unemployment rate fell to 3.5%. Despite such a positive release, the reaction of the USD was limited. The currency was already struggling with coronavirus fears. This time the situation may be completely different after the record-high unemployment claims last week. It increased the risks of this employment data coming out significantly lower than in the previous release. On the other hand, if non-farm employment change and average hourly earnings are higher and the unemployment rate is lower than the forecasts, the USD will rise.

• If the actual levels of employment change and average hourly earnings are higher and the unemployment rate is lower than the forecasts, the USD will rise;

• If the actual levels of employment change and average hourly earnings are lower and the unemployment rate is higher than the forecasts, the USD will fall.

Check the economic calendar

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440

OIL: it started

More at: https://bit.ly/2wgHLRb

02.04.2020

Very short: WTI oil trades above $25 just after $20 in the morning!

Why? Two things: China’s recovering economy is demanding oil, and Donald Trump is calling on Saudi Arabia and Russia to cut supply by 10mln bpd (no surprise Saudi Arabia calls for an emergency OPEC+ meeting now). Be careful and use the situation!

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441

Oil industry: Donald Trump’s 2 tweets boost the price

Check it at: https://bit.ly/3bSV0GJ

03.04.2020

Yesterday we saw how WTI oil prices jumped up after Donald Trump’s 2 tweets and reached the 25.30 mark. Today the WTI price went even higher and now it’s 27.32 dollars per barrel. There is definitely an upward trend, breaking through 23.6 Fibonacci level at the 26.85 mark and two lines of Moving Average, 50 and 100, respectively.

How did the oil war get started?

The Organization of Petroleum Exporting Countries met in early March and failed to agree on the amount of oil supply cut amid the coronavirus outbreak. It meant that starting April 1 all the members could pump as much oil as they want. As a result, both unlimited supply and reduced demand (because of lockdowns for many economies around the world) cause oil prices to fall dramatically.
What is the forecast for the oil market?

The OPEC+ meeting will be hold on April 6. It’s expected that Russia and Saudi Arabia will negotiate and cut oil production to raise the WTI price to nearly 30 dollars per barrel. The United States has traditionally not been a part of these kinds of meetings, but its new status as the world’s largest oil producer, coupled with its particularly expensive method of extracting oil, means that things could be about to change.

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Trading bootcamp for free

There’s going to be a virtual trading bootcamp starting from tomorrow from this broker (FBS). May be a good opportunity to learn or practice

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Can you win with the AUD?

More at: https://bit.ly/39LJxqZ

06.04.2020

RBA Rate Statement is released on Tuesday at 07:30 MT time.

Instruments to trade: EUR/AUD, AUD/USD, GBP/AUD, AUD/JPY

Australian monetary policymakers already slashed the interest rate twice in March. By reducing it to the current level of 0.25%, they tried to enhance the domestic economic environment and give it the maximum possibility to recover from the coronavirus. Given the fact that the Chinese economy – the main trade partner of Australia – is already gaining back its powers, Australia should have an improved economic outlook by the time the new rate is released. The Reserve Bank of Australia (RBA) explained that there will be no intention to raise back the rate until inflation gets to 2-3% channel and full employment is reached.

If the rate is held steady at the current level, the AUD will rise.
Otherwise, it will fall.

Check the economic calendar

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444

Emergency in Japan as coronavirus spreads

07.04.2020

Instruments to trade: USD/JPY, CAD/JPY, AUD/JPY

Coronavirus pushes to recession countries one by one. This time it gets to Japan, known as one of the world’s hardest working nation.
Soft lockdown in Japan

As coronavirus cases surged in the country, Prime Minister Shinzo Abe declared the state of emergency in the largest population centers that make up almost 50% of GDP, according to Bloomberg.

In fact, the lockdown isn’t as strict in Japan as in other countries today, it’s just a request to stay at home and close businesses, not an order. So, perhaps the downturn of economic activity won’t be so extreme. However, according to Japan economists, people will take it seriously this time.
Government measures

Moreover, Japan Prime Minister will rescue the country’s economy by almost 1 trillion US dollars stimulus package equal to 20% of Japan’s economic output. It’s more than double the amount Japan spent following the crisis in 2008.
Forecast

Many economists believe that Japan has already fallen into recession because of export declines, supply-chain disruptions and travel bans. There are fears that economy is going to shrink close to 20% in a lockdown.

As we could notice, if coronavirus cases rise, the stock market volatility rises too. As a result, Japanese yen may lose its safe-heaven status.

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Covid-19 is jeopardizing Apple’s plans

Check more at: https://bit.ly/3e2IQgx

08.04.2020

There are some doubts about Apple sustainability amid coronavirus. Who will buy and who will produce new IPhones?
Coronavirus impact on Apple

At first, problems started in Asia. Chinese factories couldn’t supply iPhones because of the lockdown with strict quarantine measures for thousands of laborers. However, the steps taken by the Chinese authorities helped to stop the spread of the disease. Now China is resuming production.

Then, the virus hit the USA and Europe causing shops to close and people to stay at home. That, in turn, hugely reduced incomes. Obviously, that would diminish demand for new Apple products. This is a crucial factor for the future financial health of the corporation. We can see now how Apple’s plans are getting ruined. The unveiling the iPhone 9/SE2 has already been delayed. Even the much-anticipated iPhone 12 seems to be released far later than planned. There are all reasons to expect that these problems will affect Apple stock price preventing it from the upside.
Technical analysis

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Apple stock had been declining since February 19, then it reversed on March 23 and reached the 271.5 mark breaking through 23.6% and 50% Fibonacci retracement levels. Yesterday it went down and now it’s on 262.51. The nearest support levels are at 255.3 or 38.2% Fibonacci level and at 248.00 where the 50-day Moving Average almost crosses the upward trendline.
Apple’s future

The quarterly revenue, January to March, combined to a 12% fall from the previous year. Wall street analysts continue to make their financial forecasts worse and target prices lower for Apple.

The manufacturing problems are over now, so the success of the company depends on the purchasing power of global comsumers. The latter will likely take a serious blow in the upcoming months. In the long-term Apple may recover its prior revenue. We should learn more from Apple’s earnings release and during the call with analysts and investors on April 30.

Remember that by trading stock CDF traders are able to open sell trades on Apple stock!

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What moves the market on April 9?

Check more at: https://bit.ly/39UAhBc

09.04.2020

Here are the most important topics that will determine the dynamics of currencies, commodities and stocks on Thursday, April 9. Notice that volatility is expected to rise during the day providing opportunities for active traders.

Coronavirus. According to the latest data from Europe, Italy and Spain both recorded the most new cases in days, while the UK announced a record number of coronavirus deaths. Prime Minister Boris Johnson remains in intensive care, although his condition has improved. Be ready for the extension of the lockdown period. Notice, however, that both forecasts from Italian and Spanish governments and experts said that the peak of the virus could come within days. These expectations will likely support the market sentiment and, consequently, riskier assets such as the AUD, the NZD, exotic currencies, and stocks.

Dismal economic forecasts. Analysts compete with each other in negativity about the futures of the global economy. The World Trade Organization said on Wednesday that the pandemic could cause a bigger damage of international trade flows than at any point in the postwar era. Wall Street banks went further and provided a number: according to them, the coronavirus will reduce the world’s GDP growth by more than $5 trillion over the next two years. This number exceeds the annual output of Japan.

US jobless claims. Today we’ll get another update on the indicator that has recently reached unprecedented levels. Forecasts are that there will be 5 million new claims after a total of nearly 10 million claims over the past two weeks. Don’t expect the USD to take a hit after the release: everyone is ready for such a number and the greenback remains the safe-haven of choice.

European failure. There’s no relief for the EUR as European Union finance ministers failed in all-night talks to agree on more economic support for the region’s economies. The negotiations will resume at 18:00 GMT on Thursday. If something is announced late during the day, it will be able to cause big moves in EUR/USD as the amount of liquidity will be lower ahead of the US bank holiday on Friday. So far, the pair has been limited by the 100-period MA at 1.0880 (H4), while support is at 1.0835 and 1.0805.

OPEC+ meeting. The pandemic won’t keep the world’s top oil producers from discussing the output cut: a video conference is scheduled for 15.00 MT time. There have been positive signals from Russia regarding the deal. Brent is consolidating in the $33.00 area. The deal will make the price jump above $45, while the failure will trigger a decline towards $23.50 and $21.65.

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EUR: $590bln rescue package

10.04.2020

What’s happening?

A $590bln financial emergency package was prepared to aid the European economy by EU finance ministers. It includes a 100bln-euro joint employment insurance fund, 200bln euros of liquidity to be facilitated to commercial organizations, and 240bln euros to support emergency spending programs of the European states.
Great news then…

Sure it is. However, formally, it is now only left to the EU country leaders to approve it. As you understand, that “only” is an abyss to leap over, given the current political and economic disagreements between the European states.
Why so?

Primarily, because the virus, although biologically indiscriminative to societies, hit Southern Europe disproportionately harder than the North. Specifically, Spain, Italy, and France suffered most losses, while countries like the Netherlands, Germany or Sweden received much less damage.

On top of that, there are clear inter-state political and economic differences between the European countries, which have been there long before the virus came, but the hardened situation over the pandemic just made those differences more severe.

And finally, there are internal political struggles and fragmentation resulting in the fact that each opposing party or politician is trying to use the virus countermeasures to boost their own recognition and agenda.

Altogether, these factors lead to heavy doubt about the real level of the EU functionality and even integrity as an economic and political structure. Needless to say, if the European leaders manage to fail on this step, the EUR will lose much of its value. Otherwise, should they overcome their discords and approve the financial aid, EUR will be boosted in the long-term.
So what do I do?

You watch the levels. Currently, EUR/USD trades between the support of 1.0920 and the resistance of 1.0970. Activity on behalf of the US Fed and Trump’s positive “incursions” in the media with regards to the oil talks between OPEC+ countries give support to the USD, however, so far, EUR has been fighting that off. If next week brings some positive news on the progress over the mentioned financial plan, the resistance of 1.0970 should be crossed, and 1.1030 will be the next possible target in line with 200-MA. Otherwise, 50-MA and 100-MA will be there to greet the disappointed euro and walk it to the support of 1.0855. So watch the news and act accordingly.