Market Analysis – March 23

Market Analysis – March 23

The market has been losing volatility and in the currency market the movements have become more lateral, losing directional momentum. The US Dollar in general terms as we can see the Dollar Index, has slowed its bullish momentum and is trading in range since the end of last week.


Yesterday the US Dollar strengthened slightly against the Yen, Sterling Pound and Australian Dollar and weakened against the Euro. In the latter case, EUR/USD activity has been more intense and has broken the bearish channel in which it had been developing for the last few days, remaining in a range limited upwards by resistance at 1.0825 and downwards at support 1.0640.


FED drops the bomb


The rapid rise in EUR/USD above 1.0800 was motivated by the announcement of a new extraordinary monetary policy measure by the Federal Reserve. The Fed said it will buy unlimited amounts of government-backed bonds in "amounts needed to support smooth market functioning and effective transmission of monetary policy".


If the QE announced by the ECB was called a Bazooka in market slang, this Fed decision can be considered a real nuclear bomb. This unprecedented measure in the market supports both Treasuries and commercial paper or Mortgage Back Securities and the North American central bank goes from buying 43 Trillion per month to 125 Trillion "per day".


The announcement caused TNOTE10 to rise another day, around 8%, and initially pushed the Dollar lower, although it later recovered much of this movement. The stock markets also underwent a recovery until the initial losses were erased and later returned to negative territory.


Gold shines through, finally


But the great beneficiary of this exceptional measure of the Federal Reserve is GOLD. The enormous liquidity provided to the system devalues ​​the money and yield on quality debt will go close to zero, say market analysts. Given this scenario, Gold, as an investment alternative and as protection against potential inflation, becomes the protagonist. Yesterday it turned around higher, after several days of falling and exceeded level 38.2 Fibonacci of the bearish leg started on March 9. Now the main resistance is at 1602 which corresponds to level 68.2 Fibonacci.


US Coronavirus bill


The stock markets are more aware of the news from the Senate and the US Congress where the so-called "Coronavirus bill" must be approved. The latest news is that after two failed attempts, conversations began between representatives of the Republican and Democratic parties to be able to reach an agreement in order to deliver financial support to corporates and workers. An unprecedented move that will make the economy flow more than 1 Trillion Dollars.


If this "Coronavirus Bill" is approved and it does not disappoint expectations, there could be positive flows in the stock markets that have suffered exceptional losses in these weeks and that have already largely discounted adverse scenarios.


By: Miguel A. Rodriguez Ruiz


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The information presented herein is prepared by CAPEX.com and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.