COVID-19 continues to spread around the world and oil experienced the biggest drop since 1991. As a result, several central banks are taking steps to help sustain economic growth and help businesses stay afloat.
On Tuesday March 3rd, the United States Federal Open Market Committee made an unexpected rate cut by 50 basis points to 1.25%, last seen in 2017. Bank of Canada followed suit and also cut their interest rate by 50 basis points to 1.25%. The next meetings for the FOMC is on March 18th and further easing is expected.
Today, Bank of England voted unanimously to cut the interest rate by 50 basis points at an emergency meeting. The current interest rate stands at 0.25%. The United Kingdom is to release their annual budget around 1:30pm GMT which will include spending for the NHS as the number of infected climbs to 382 and death toll reaches 6 people, according to Johns Hopkins University.
ECB President Christine Lagarde spoke out to European leaders and expressed the need to work together and act immediately to avoid a scenario like the 2008 great financial crisis, according to Bloomberg. The European Central Bank will make a decision on monetary policy this Thursday March 12th at 12:45pm GMT and Lagarde mentioned that that all tools for stimulus are being observed and measures will be taken possibly as soon as this week.
The European Union is taking a hit from the coronavirus, especially considering that the state of the economy was sluggish even before the breakout. Italy is on national lockdown, and in second place by number of infected, which is 10,149 and 631 fatal cases, France is in fifth place followed by Spain and Germany, according to Johns Hopkins University.
As an additional blow to the financial markets, OPEC leaders and allied countries, particularly Russia did not reach an agreement to cut production to support weakening demand due to the coronavirus. As a result, Saudi Arabia and Russia have embarked on an oil price war. Oil prices plunged by the most since 1991 with Brent reaching a low of 31.25, current trading around 36.01 and Crude dropped to 27.34, currently trading around 33.40. Saudi Arabia stated that they will increase production by a staggering 25% from the previous month, and Russian responded with the possibility to increase production by 500,000 barrels a day. Low oil prices are especially destructive for United States shale oil companies, as they are severely leveraged by banks and require the price of oil to be around $50 per barrel to break even. As we continue to monitor the situation commodity currencies like the Canadian Dollar, Russian Ruble, and Norwegian Krona will be in focus.
EUR/USD on a Daily TF soared, broke above trend line down dating back to 2018, reached a high of 1.14950 and is currently trading around 1.3331. There is another global trend line down dating back to July 2008, which is in the vicinity of 61.8% Fibo around 1.14359 – 1.17888.
Resistance: R1 38.2% Fibo 1.14028, R2 1.15, R3 50% Fibo 1.15958.
Support: S1 1.12370, S2 23.6% Fibo 1.11639, S3 1.11.
GBP/USD on a Daily TF is trading slightly below key level of 1.29500 resistance. The pair is currently trading around 1.29205 and has been trading in somewhat of a bearish flat since the beginning of 2020. The pair is supported by 200EMA with 13 and 48 EMA acting as resistance.
Resistance: R1 1.29500, R2 1.30, R3 1.31.
Support: S1 200EMA 1.28570, S2 1.27685, S3 1.27.
USD/JPY on a Daily TF dropped to support levels last seen in 2016, reaching a low of 101.180. The price has since rebounded and currently trading at the next key level of support around 104.778. The pair is driven by USD weakness, uncertainty and safe haven Yen.
Resistance: R1 105.663, R2 106.360, R3 107.095
Support: S1 102.553, S2 101.180, S3 99.996.