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EURUSD price returned to the balance line

On Tuesday, March 3, trading on the euro closed with an increase of 36 points ( 0.32%). A surge in volatility was observed in the American session. At an extraordinary meeting of the Open Market Committee, the US Federal Reserve decided to reduce the basic interest rate immediately by 50 bp, to the range of 1-1.25%. This decision was passed unanimously just a few hours after a conference call between Jerome Powell and financial managers from the G7 countries. The reason for the reduction in rates was the desire to reduce possible risks to the economy resulting from the coronavirus threat. Off the back of this news, EURUSD jumped up from 1.1096 to 1.1213 (123 points).

Today’s events (GMT 3):

  • 11:50-12:30: Markit Services PMI (Feb) in France, Germany, the Eurozone, and the UK will be released.
  • 13:00 Eurozone: Retail Sales (YoY) (Jan).
  • 16:15 USA: ADP Employment Change (Feb).
  • 17:45 USA: Markit Services PMI (Feb).
  • 18:00 Canada: BoC Interest Rate Decision, BoC Rate Statement.
  • 18:00 USA: ISM Non-Manufacturing PMI (Feb).
  • 18:30 USA: EIA Crude Oil Stocks Change (Feb 28).
  • 22:00 USA: Fed’s Beige Book.

eur_040320 EURUSD jumped up from 1.1096 to 1.1213

Current situation:

Expectations for a rollback to the balance line (Lb) were fully justified. Under the current price model, growth in rates and a new maximum being set on Tuesday were not considered.

The U3 line (sma 55 with a deviation of 1%) once again acted as resistance. From here, the price underwent a correction to 1.1143. Through 1.1134, we find the 67th degree and the Lb. A new strengthening of the euro may follow on from them, but it is unlikely to last very long, as a “bearish” divergence has formed between the current price and the AO indicator. The reference level is 1.1120, located under the Lb, if it is brought down, then the fall will accelerate to 1.1050.

There is another important point: the extraordinary FOMC meeting was a surprise for everyone, as it was scheduled for March 18. At the meeting, a decision was made to lower RBA rates. Today, we should also expect a rate cut by the Bank of Canada. If all central banks reduce their rates, then nothing of note should change amongst major currencies.

We do not consider growth for today, note that on the daily TF the euro went up by 3.9% against the dollar without savage pullbacks. A correction to 1.1045 will allow for unloading of indicators above 8H on TF.