For several weeks the currency market has stabilized around a fairly contained trading range, and in the absence of real news on the pandemic and the end of the lockdowns, this lateral phase will probably continue, waiting for something to be clarified and to take a direction.
After the great fear of the month of March, with the stock markets down and the risk off phase accentuated, we saw a significant rise, even if not all the descent was recovered, both on equity and on other markets. Except for oil, which sank below 20 and stabilized after the panic selling movement of the past week, in the $ 15 area.
On forex, the dollar has begun to lose ground, although it does not appear in a bearish trend, but still something on the greenback is changing, in terms of confidence. The euro holds thanks to the confidence in the interventions of the ECB, interesting the situation of the australian dollar and the New Zealand dollar.
The risk off should not be ended, unfortunately: when it is seen that the recession will not be short and temporary, we will most likely begin a more structural although less violent descent, because it will be realized that it will take years to return to pre-pandemic levels.
Forex analysis and forecasts for EUR/USD and GBP/USD
Confidence in the dollar is decreasing, although there is no real downward trend for now. This is evidenced by the fact that for at least a week, the Fed’s dollar swap reports have not found buyers, a sign that the dollar hunger for the month of March seems to have completely disappeared today.
Perhaps investors are realizing that the US, between the pandemic and the worsening data, are not as advantageous as an investment at this stage and prefer to keep liquidity or wait for better moments by diversifying their portfolios towards other assets.
Euro which also held due to S&P’s failure to downgrade Italy, which recalled in the comment the fact that the ECB is buying Italian securities. We will see if the central bank continues its purchase program which should help the BTP-Bund spread drop, as has happened in the last week with the price falling from 280 to 240 basis points.
EUR/USD above 1.0840 with the possibility of accelerating towards the targets located in the 1.0875-80 area (resistance area), while on the downside the supports intervene in the 1.0795-1.08 area. The phase appears to accumulate and in the case of breakage of the first resistances, we cannot exclude a test at 1.1000.
GBP/USD also follows the trend with the overcoming of 1.2400 area after we had seen 1.2250 supports very well. Exceeding 1.2450 could push Cable prices towards 1.2520-30, an interesting swing area. Support intervening at 1.2345-55 area.
Analysis and forex forecasts for AUD/USD, NDZ/USD, USD/CAD and USD/JPY
AUD/USD is on the period double high at 0.6450. The decided overcoming of this area would change the medium-term scenario with targets at 0.6650-60 and possibly the return also towards 0.7000. Same thing for NZD/USD who is slightly behind, on a daily basis, than Aussie, but remains liable to an acceleration towards 0.6200 in the medium term. On these two crosses, analysts continue to argue that the bearish trend of recent years may end.
Other opportunities come from USD/CAD, which regardless of the oil price is always in a bearish trend but close to objective lows.
Little interest on USD / JPY: the desire to sell dollars is accompanied by the persistent intervention of the Bank of Japan to keep the yen weak and to preserve an unlimited Qe, with the now traditional Zero interest-rate policy that has been going on for over ten years . Let’s not forget that it is the government that then decides the rate policy, as well as maintaining the 10-year rate at 0.10%.
This monetary policy could also be embraced by other central banks, a sign that the independence of the markets is now utopian. We cannot know if without these interventions the situation would be better: the fact of having supported the markets has served to calm them down but we must ask ourselves if we are treating the symptoms or the disease.