The USD strengthened against the JPY and the EUR mainly, as hopes for a possible fiscal stimulus to be provided by the Trump government grew. US President Trump stated that the White House is to hold a press conference today about possible “substantial” economic measures to respond to the coronavirus outbreak in the US. Also, US Treasury Secretary Mnuchin stated that the White House will meet with bank executives this week, which was considered as an additional signal that the US government is preparing to roll out some countermeasures for the coronavirus as per media. It should be noted that the USD got an additional boost as US treasury yields bounced slightly yesterday. Analysts tend to note that the risks deriving from the coronavirus still exist, as well from the recent crash in oil prices yesterday for the US economy. Also note that the market has priced in by 85%, a 75 basis points rate cut by the Fed at its next meeting on the 18th of March as per Feds Funds Futures. We expect that dovish expectations of the market could have an adverse bearing for the USD, which currently seems to be oriented towards a possible fiscal stimulus. EUR/USD dropped yesterday and mostly during today’s Asian session, after failing to clearly break the 1.1480 (R2) resistance line and retreated lower breaking the 1.1410 (R1) support line, now turned to resistance, aiming for the 1.1345 (S1) support line. As the pair’s price action broke the upward trendline incepted since the 5th of March, we switch our bullish outlook in favour of a sideways movement for the time being. Should the pair continue to be under the selling interest of the market, we could see it breaking the 1.1345 (S1) support line and aim for the 1.1285 (S2) support level. Should the pair’s long positions be favoured by the market, we could see it breaking the 1.1410 (R1) resistance line and aim for the 1.1480 (R2) resistance level.
Japanese government pressures BoJ for monetary policy easing
The Japanese government seems to be exercising pressure on the BoJ to ease its monetary policy further in its meeting next week, in order to boost the economy against the adverse effects of the coronavirus. Japan’s Prime Minister Abe stated that the government will work closely with the Bank of Japan to stabilize the market, practically increasing pressure for a monetary policy stimulus. The comments were made after BoJ Governor Kuroda stated that the bank was ready to act against “very unstable” markets as reported by media, also implying a possible easing of its monetary policy. It should be noted that the market currently has priced in a 10-basis points rate cut by the BoJ by 82% as per JPY OIS. Also, Reuters reported that a senior official from Japan’s Ministry of Finance stated that nervous moves are continuing in the FX market and that he was closely watching currencies with a sense of urgency. USD/JPY rebounded from its lowest level since 2016 and the pair broke consecutively the 103.00 (S2) and the 104.15 (S1) resistance lines, now both turned to support. As the pair’s downward spiral was halted and the pair corrected higher, we switch our bearish outlook in favor a sideways movement currently. Should the bears take charge, over the pair’s direction, we could see it breaking the 104.15 (S1) support line and aim for the 103.00 (S2) support level. Should the bulls continue to be in charge, we could see the pair breaking the 105.30 (R1) resistance line and aim for the 106.60 (R2) resistance level.
Other economic highlights today and early tomorrow
Today during the European session, we get Norway’s inflation rates for February and Eurozone’s revised GDP growth rate for Q4. After a rather quiet American session and just before the Asian session starts, we get the from the US the weekly API crude oil inventories figure for last week and New Zealand’s electronic cards sales for February. In the Asian session, we get Australia’s consumer confidence for March. Also please note that early in Wednesday’s Asian session, RBA’s Deputy Governor Guy Debelle will be speaking.
EUR/USD 4 Hour chart
Support: 1.1345 (S1), 1.1285 (S2), 1.1230 (S3)
Resistance: 1.1410 (R1), 1.1480 (R2), 1.1560 (R3)
USD/JPY 4 Hour chart
Support: 104.15 (S1), 103.00 (S2), 101.65 (S3)
Resistance: 105.30 (R1), 106.60 (R2), 107.75 (R3)
