The next week of April has a rich political agenda, especially regarding additional measures to support national economies. National governments and national central banks continue to expand the package of financial measures and incentives to support the securities market, business and citizens.
Monetary and humanitarian actions are already having a positive effect on stock indices, whose recovery next week will lead to an increase in demand for major national currencies. It can be strengthened by the fall of the US dollar – the country has to go through the peak of a pandemic.
The situation in the oil market and the deterioration of world statistics on the victims of Covid-19 can cancel this scenario. Investors are waiting for firm agreements from OPEC countries and a decline in the international dynamics of deaths / infections. If this does not happen, the dollar and gold will again act as protective assets.
The coronavirus in the world has not yet been stopped. This is evidenced not only by the UN World Health Organization, but also by sad statistics. The vaccine has not yet been created – obviously, there are no more such doctors as there were earlier who could think outside the box and find a cure in the most hopeless circumstances. The Bologna education system has finally eliminated smart people in all sectors, including medicine. Therefore, all over the world it will be necessary to strengthen or extend quarantine measures, which will aggravate the economic crisis, and therefore require a new package of measures to support the population and business. They will be presented next week. The United States sets the tone for these processes. Therefore, the trend of strengthening the dollar and gold will continue, coinciding with the decline in stock market indices. The fall of stock indices will negatively affect the rates of major and regional currencies.
The effective OPEC + meeting, which can raise and stabilize energy prices, can slow down the general recession.
A noticeable growth of the US dollar will occur in the first half of the week if OPEC does not solve the problem of regulating oil prices. From April 1, cartel members will no longer be bound by any restrictions on production. Therefore, any increase in supply will sharply bring down markets, leaving investors without alternatives to dollar investment.
A possible option is the weakening of the American dollar, launched by traders last week. It can be continued in the middle of next week due to the active work of the “printing press” of the Fed. Huge amounts of US currency are pumped into the markets through QE programs and direct payments to the population from the White House.
Another negative factor for the dollar is the suspension of production against the backdrop of the growing number of coronavirus cases in the country, the number of which exceeded the number of sick Chinese citizens. The US president is trying to prevent isolation, as a reassessment of the threat of a pandemic could trigger investors to exit dollar assets.
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The British pound, which broke all records of volatility and depreciation in the last two weeks, spent the last two trading days in correction. But it seems that the correction has already been completed, and the downtrend for the GBPUSD pair may resume from the very beginning of the coming week. Unfortunately for the British pound, the fundamental and macroeconomic background now plays no role. In the markets, panic caused by a drop in oil and coronavirus. Unfortunately, it is impossible to control and very difficult to influence. Moreover, oil prices continue to fall, US stock indices – to decline. The only good thing about this is that commodities and stock markets cannot fall all the same. Oil cannot be long below cost levels. Even if the cost of production exceeds the market price, sooner or later the volume of production will decrease, since it will simply be unprofitable to mine. And this applies not only to expensive American shale oil, but also to cheaper grades in production. However, there is another side to the coin. Shale oil producers may go bankrupt or ask for help from the state. And the state is the United States, led by Donald Trump, he loves to conflict and fight. Considering that now, in the general opinion, Saudi Arabia is to blame for what is happening, which decided to oust competitors from the market by dumping prices, we can expect a new conflict in the Middle East, new sanctions, and new trials at the international level. Unfortunately, all these actions can only aggravate the situation in which the whole world finds itself. We believe that it is possible to get out with the least losses from the current situation only by cooperating the efforts of all countries. However, this method of solution in higher political circles is not popular. From a technical point of view, the GBPUSD pair has corrected and can now resume the downward movement. You can continue to trade when it goes down. However, due to the high uncertainty in fundamental factors, it is recommended to be extremely careful with the opening of any positions.
Last week showed that traders ignored the ECB rate retention, returning to dollar purchases, despite the Fed rate cut.
The American currency again becomes the main one for investors and the upcoming five-day period is able to continue this trend.
The growth of major currencies is unlikely, it can begin only under the influence of the following factors: the price of oil, data on deaths and morbidity of coronavirus and the actual size of assistance to the end consumer. Last – especially important, coronavirus threatens small business, which provides the main employment of the population. Liquidity allocated by banks and soft loans do not reach small enterprises. The EU and the US have promised targeted assistance to both employers and forced quarantine workers. Only received grants can stop the fall of stock indices and strengthen national currencies.