Fibogroup Market Analysis 2020

[fibogroup.com]

Crisis: US Labor Market Collapse

According to the Ministry of Labor on Thursday, 281,000 people applied for benefits for the first time - 70,000 more than the week before last. The new figure is the highest for two and a half years.
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At first glance, it’s not a very important indicator for trading on currency pairs. However, in the current situation, this may become the next black swan. About half of those working in the United States are private businesses, whose rents account for the largest portion of business expenses. And it’s easier to close a business and then reopen without debt (this is better than paying rent in the absence of sales and movement restrictions).
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In the current situation, the best way out is to wait until next Thursday, there are well-founded reasons that the number of unemployed American businessmen will increase.
And these are very serious risks and maybe we will see another bottom on #EURUSD and world stock indices.

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[fibogroup.com]

Forex analytics

Market Watch

Europe is preparing for a total quarantine

On Thursday, March 19, it became quite complicated for Europe and, in particular, European currencies. Let me remind you that Italy still faces a continuous quarantine zone which restricts the movement of the population. France also followed in the footsteps of Italy and in a number of other European countries the situation remains quite complex. Given the rapid spread of the virus in Europe, the situation is bound to remain volatile in the coming days.
As a result, we observed a sharp fall in the EUR / USD currency pair which brought it to the lowest levels since 2017. At the same time, there remains a lot of buying interest around the 1.0785 level which for now should keep the Euro from suffering further losses.
The situation is similar with the GBP / USD currency pair which hit historical lows. Today we are already seeing some type of rebound with the target at 1.2000 and even to 1.2125. This scenario will be a major target but we may see a return to the support level of 1.1785. However, active market purchases are no longer feasible, since now there is no way to place a short “stop” to get a risk to profit ratio of 1 to 3 or more.
The rapid deterioration of the economic situation in Europe and the talk by several countries on the possible extension of quarantine, as well as moves by the Fed who are attempting to save the US stock market, contributed to the strengthening of the USD. I’ll draw attention to the US dollar index, which has reached its highest level since 2016, which, in turn, increases the risk of a strong correction in the short term.
Now let's move on to the oil market and in particular, American grade WTI. After collapsing to $ 20.5 per barrel, buying interest has picked up. But it’s hard to imagine a significant increase in prices until the position of Russia and Saudi Arabia on the issue of production, as well as stabilization of the situation associated with the coronavirus, changes.
And traditionally for the Friday review, we will consider two transactions for traders on the purchase of the GBP / USD currency pair in full lot. The first deal to buy was opened on Thursday, March 19, at a price of 1.1480. The Take Profit order was set at 1.1650. As you know, the pair reached the level of 1.1792 that day, but then collapsed under the support level of 1.1465. Since buyers immediately managed to return above the noted support level, it was decided to open another buy deal from the level of 1.1480, setting a Take Profit at 1.1780 - the previous maximum. The total Profit on two transactions amounted to $ 4700.

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[fibogroup.com]

US will buy a billion barrels of oil

The US Treasury Department recommends that President Donald Trump allocate $ 10-20 billion for the purchase of oil in the Strategic Petroleum Reserve (SPR).

At current prices of the American WTI grade ($ 22 per barrel for delivery in April), this means a purchase of 454-909 million barrels. The acquisition of oil will be aimed at keeping the reserve filled to capacity for a decade.

How exactly this will be done is unclear, most likely, things will not go beyond verbal rhetoric, because strategic oil reserve a week ago contained 635 million barrels with a total capacity of 727 million barrels.

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[fibogroup.com]

Forex analytics

Market Watch

Italy shows more rounds of disappointing data

US and European stock markets are in a bearish trend and there are no real reasons the situation will change. In fact, the volatility of the stock indices reflects the real mood and expectations of large investors - a panic mood. The reason for the panic is total quarantine in most European countries, as well as other countries in the world.
It is worth noting that by the end of last week, the amount of sellers, both on the stock market and foreign exchange market, had noticeably declined. For example, buyers of the EUR / USD and GBP / US currency pairs managed to compensate for some of the lost positions. But today we are seeing a moderate weakening of EUR and GBP.
So, the quotes of the EUR / USD currency pair returned to the psychological level of 1.0700, while only a break of support at 1.0650 will indicate the possibility of a further selloff to 1.0570 and 1.0500. The situation with the GBP / USD currency pair is similar - after an unsuccessful attempt by buyers to push the pound higher, the pair returned to the support level of 1.1655. As a result, the risk of a breakdown of support at 1.1540 and a further decline to 1.1425–1.1465 is quite possible.
Let me remind you that the ECB continues to use not only verbal interventions, but also various tools to stabilize the economy. At the same time, regular statements by representatives of the ECB about the readiness to participate more actively if necessary, play an important role, thereby providing support to the stock market while at the same time putting pressure on the EUR.
Turning to the oil market, which continues to decline, I note the increasing risk of a collapse in the price of WTI in the region of $ 16– $ 18 per barrel. At the same time, I do not expect prices to remain at this level for the long-. Therefore, I consider the decline in oil prices as a more favorable point for opening long positions. Of course, we are talking about medium-term trading in the context of several weeks, possibly even months.
To sum up, I will turn to the US and their attempts to restrain panic in the financial markets, as well as among the population. We are talking about a package of incentive measures for some sectors of the economy, for example, industrial, as well as airlines, small businesses and households. They plan to allocate at least $ 1 trillion for this, which should help markets avoid further losses in the long run.

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[fibogroup.com]

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

The Fed announced an “endless” quantitative easing to support the economy. Markets soared up.
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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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[fibogroup.com]

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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[fibogroup.com]

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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[fibogroup.com]

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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[fibogroup.com]

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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[fibogroup.com]

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.
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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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