Coronavirus stimulus bill – Market Analysis - March 24

Coronavirus stimulus bill – Market Analysis - March 24

Although at the time of writing this analysis, the "Coronavirus bill" has still not been definitively approved in the US Senate, everything indicates that we are very close, and its content has been largely known. The stimulus package priced at $ 2 Trillion is of such magnitude that, together with the extraordinary measures already taken by the central banks, not only the Fed but also the ECB, have served to make the stock markets recover strongly.

Note that uncertainties about the intensity of the crisis are still present, everything will depend on the duration of inactivity and that variable cannot yet be evaluated.

However, in the short term, purchases can continue, in the case of USA500, the overcoming of the level of 2544, 38.2% Fibonacci, would be the first positive technical point.


GOLD continued its bullish sprint beating 61.8% Fibonacci at $1607/ounce and leaving the way open for the latest highs at $1702.

The market driver for this move is the extraordinary Fed QE that devalues money and encourages inflation. GOLD is traditionally used as inflation hedge. It is a scenario similar to the one that occurred during the great crisis of 2008.


The numbers show the decline


The PMI data released yesterday showed for the first time the huge negative impact of the crisis on the economy. Europe was the most affected especially in the services PMI with a drop to 34.5 in Germany and 28.4 in the Eurozone.

In the USA, the data was somewhat better with 39.1 in services and a surprisingly good 49.2 in manufacturing. For this reason, in addition to the demand as safe haven that continues to be maintained, the US Dollar was favored, reaching new highs in USD/JPY and pushing down EUR/USD, which first broke the range by exceeding 1.0825 but fell again.

EUR/USD has formed a reversed pattern (head and shoulders) activated at 1.0770 with a theoretical lower target at 1.0659, say technical analysts.


The European situation


The Euro remains in a vulnerable position, not only because of the worst economic figures, but because of the European Commission's lack of decision on the stimulus measures. The market expected approval of the issuance of Eurobonds that support countries at risk due to their extraordinary financing needs, but the latest news was that Germany refused to take this measure.


The Yen crosses that have been experiencing enormous downward pressure also rebounded in a highly correlated move with that of the stock markets.

This is the case of GBP/JPY, who, for the first time since the start of the crisis has experienced a considerable recovery. If this recovery will continue to be fueled by risk-on reactions, analysts say it could reach critical resistance levels located at 131.82 and 133.67.


By: Miguel A. Rodriguez Ruiz


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Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

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