There have been non-stop movements across the financial markets over the last couple of weeks, big and irregular moves.
Looking specifically within the forex market, huge price action as much as 200-300 pips in a day for some pairs.
Why are we seeing all of these moves?
Initially, the markets were being largely driven by fear, but then on facts with growing numbers of Covid-19 cases across the globe. There was much in the way of safe-haven flow, which predominantly was being received by USD and JPY, a little bit of CHF also.
Central banks then started to step up efforts with a series of rate cuts and quantitative easing measures, to cushion the economic blow. All of this dovish action was hurting their respective currencies, such as was seen with; GBP, CAD, AUD, NZD, EUR.
Gold started to get slammed as investors were closing out of assets in favour of cash, which was largely benefitting the USD. The U.S. dollar is the reserve currency of the world and is the most liquid. On this, the greenback was skyrocketing, massively outperforming many of its peers.
Now, giving the growing threat to the world’s largest economy with Coronavirus cases dramatically rising, the central bank, FOMC had to step up their response.
A series of rate cuts taken from them, but more importantly and marketing moving, their unprecedented announcement to essentially conduct an unlimited amount of QE. They are substantially diluting the dollar, hence the shift in sentiment for the greenback. Pressure across the board is now being observed versus its peers.
Next major focal point: US weekly initial jobless claims data.
During these uncertain times, we should take some positives and use this time wisely; let's continue to self-educate and be constructive. There are opportunities every day to extract money from the markets.
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