US Dollar Surges as Stronger Fed Stimulus Expected

EURJPY Bounces Off September’s Low

While markets were anticipating an aggressive move from the ECB in the wake of the rate cuts from the Fed and the BoE, Christine Lagarde surprised us all by holding fire and shifting the responsibility onto government fiscal policies. The euro saw the opportunity to take a firm stance against the Japanese yen.

This week will see the response from the Bank of Japan, and volatility is likely to increase as we expect deeper stimulus for the struggling Asian economy. A bullish reversal will need to break above 121.00. On the downside, the psychological level of 116.00 is the major support.

USDCHF Recovers Lost Ground

The US dollar rallied sharply as the market meltdown pushed investors into the most liquid currency. As the US braces for the outbreak, the Federal Reserve has pledged to provide $1.5 trillion in short-term liquidity to calm nerves.

Market participants expect the announcement of more drastic measures on Wednesday to fight off the economic fallout. Further stimulus may continue to add pressure on the Swiss franc.

The greenback is rising back to the 30-day moving average (0.9650). A stronger momentum could send the pair towards the February high of 0.9850.

GBPAUD Maintains its Uptrend

The spread of the coronavirus has overshadowed the Brexit theme. Face-to-face trade talks between the EU and Britain have been canceled as countries rush to contain the outbreak across the continent. This leaves Brexit-related volatility on the backburner, for now.

An upbeat UK jobs figure could give the pound sterling a further lead over the Australian dollar. The pair is climbing back towards the previous high of 2.0700. The bullish trend line would act as the immediate support in case of a retracement.

Gold Loses its Shine Against US Dollar

With equity markets down more than 20% from their peaks earlier this year, one would have thought that the precious metal would cushion the blow as a safe haven asset. Yet bullion failed to keep its head above $1,700 an ounce and dived $150 instead. It looks like that in times of extreme panic, investors would rather cash out and hold the mighty dollar, especially after the Fed’s massive liquidity injection.

Gold has broken below the daily support of 1560, a sign that the bullish run might have been compromised after longs took profit. If buying fails to extend beyond 1640, we may see a deeper pullback towards 1500.