Currency summary of the week. Who did the market earn?

During the last five sessions a lot has happened on currency pairs, which coincided with the dollar. We observed a drastic increase in volatility, which reached almost 4-5%, and sessions usually ended + 2% in favor of American money. This appreciation, of course, was the result of an increase in global risk aversion. Capital migrated mainly from emerging market shares into US assets that are considered safe haven during all fears of global economic conditions. What currencies have gained in value during the last sessions? Will the continuation of these trends await us next week, or will we correct our current movements? We invite you to a short summary.

Europe in focus

While recent reports show that the situation in China is relatively controlled, this cannot be said for Europe. The Old Continent has become the epicenter of virus development. I think there is no need to quote the history of the epidemic spreading in Italy. I think that in the current information flow, every reader is up to date with the current situation in terms of, for example, the number of cases.

European Central Bank together with "local" central banks, it makes every effort to mitigate the effects of the epidemic. More on this topic we write in a separate article. Now we will look at how these decisions influenced the euro.

Chart EUR / USD, H1 interval. Source: xNUMX XTB xStation

The mere announcement of the purchase of assets was practically unnoticed on the currency market and European currency quotations. This is not very convincing news for investors or is strongly muffled by the subject of a pandemic. Perhaps this issue will fall to the background and  when the buying program begins to grow larger, there will be appreciation movements on EUR. The valuation of optimistic news from the ECB may simply move over time

Eurodolar has now stopped near the last hole at 1.06514. He rebounded slightly from him, although assuming that the current sentiment would persist for another week, maybe this is a good opportunity to take a short position. You can see with a naked eye that the trend is strongly downward. Flattening the medium and breaking the peak above the last confirmed hole will give the euro a chance to make up for some losses.

The labor market may break the dollar

The dollar has undoubtedly been the strongest currency of recent days. Just a few weeks ago, we were talking about very good readings from the US labor market. According to the Federal Reserve, the level of unemployment benefit claims is a key indicator for assessing the potential and economic strength of the US. The vision of maintaining fantastic readings did not last long. As you can guess, it ended with the first signs of an epidemic in the US. The latest readings of this indicator recorded the largest growth jump, practically since 2017. We are talking about 281 thousand applications for unemployment benefit, when the previous publication was only 212 thousand. Will this information be able to stop the appreciation of the dollar a bit? I don't think so. If these figures were to increase for another month in a row, we would actually be dealing with a clear signal of a downturn in the United States. Such considerable progress made by the number of claims for allowance is certainly a reaction to the coronavirus. Nevertheless, there is such a probability that we will see such a large increase only now, when the epidemic takes on the proverbial wind in its sails.

Nevertheless, we will put aside speculation on this issue, due to the fact that forecasting anything nowadays is extremely difficult. Instead, let's take a look at one of the more interesting dollar-related charts of the week - USD / JPY. 

Chart USD / JPY, H1 interval. Source: xNUMX XTB xStation

Strong dollar strengthening against the yen can be seen with the naked eye. Two peaks formed on the list that could suggest a reversal of the current trend. However, taking into account the fact that the dollar is in strong upward sentiment, I would rather expect a correction of the current exchange rate and further appreciation of the USD.

Global weakness weakens the zloty

Economic paralysis is at its best. The problem comes from the dollar, because it represents a very high percentage of global exchange. Enterprises that cannot credit the institutions on a larger scale or extend liabilities already incurred in USD will try to obtain them from another source. Spot transactions and the entire instant market will be the main focus of companies that, making the purchase of USD there, will massively increase the dollar price. This phenomenon could be called short-term demand, while taking into account the time during which the epidemic can freely spread, it draws this short-term nature. Of course, he loses a lot in this situation  golden. The MPC reaction and lowering interest rates was no impulse to strengthen the zloty. Unfortunately, global, loose economic policy has led to a massive increase in debt. High demand for the dollar will be unfavorable for the zloty in the near future.

USD / PLN chart, H1 interval. Source: xNUMX XTB xStation

Looking at the USD / PLN chart, it is difficult to talk about bouncing from / to psychological levels. They have long been exceeded. After the last five sessions, we will pay 4,2303 PLN for the dollar today.