The coronavirus COVID 19, walking on the planet, with all the proletarian anger has hit the global stock exchanges. And not only for them. Almost all highly profitable and risky assets were under serious pressure (in addition to stock market instruments, these include raw materials, commodity currencies and emerging market assets). You don’t have to go far for an example: just look at the quotes. So, at the time of writing this forecast, a barrel of WTI oil was giving only 45.33 US dollars. Futures on the RTS index fell to 1287, the American dollar was worth 67 rubles. 03 cop., And EUR as much as 74 and a half rubles.
Such a collapse of highly profitable and risky assets is quite natural in the current conditions. First, the victorious coronavirus parade caused massive profit taking. And then the markets, frightened by the media, intensely inflating the topic (the so-called "infodemia"), simply could not stop. Indeed, the first reaction of market participants to any serious negative is the dumping of distressed assets.
There are, of course, a number of instruments that have only benefited from the coronavirus: these are traditional protective assets (gold, the Japanese yen, the Swiss franc and, in part, the “treasuries” of the US government). But there is another “unconventional” defensive asset that has appreciably strengthened in this situation. This is the Single European Currency (EUR, EUR).
The fact is that EURO, in essence, does not apply to defensive assets. Moreover, until recently, the EURO remained under pressure due to growing discrepancies in the monetary policy of the US Federal Reserve (the rate is stable, moderate stimulus) and the European Central Bank (in fact, a negative rate, the urgent need for large-scale stimulation of the economy). In addition, EURO suffered from the problem of disruptions in the supply of Chinese parts and components for the European automobile industry and poor macroeconomic performance in almost all major European countries and the Eurozone as a whole. And in the last seven trading days, the fall (in the EUR / USD pair quotes reached 1.07771 on February 20) gave way to rapid growth. And now, the single currency is trading above 1.11 against the US dollar. Why did this happen?
It is worth recalling that this already happened at the beginning of the global crisis of 2008. Now it’s absolutely the same. Amid a sharp drop in the stock market, at some point after a noticeable increase, gold began to decline. For the reason that some market participants began to sell precious metal in order to plug holes and maintain unprofitable positions formed on stocks. The dollar index is also falling (at the moment 97.523 against 99.820 – maximum of February 20). Highly profitable and risky assets fall by definition. Where does the investor go? There remains only EURO, which temporarily acquires the status of a protective asset that helps to survive the collapse in the stock market. Once the stock exchanges stabilize, EURO will begin to sell "from the top" with terrible force. And this moment is already close.
In the light of the foregoing, the trading idea for the sale of the Unified currency for the US dollar with the following parameters seems quite justified:
Sell Lim. 1.11800 (conservatively) or Sell “on hand” not lower than 1.11000 when turning down to H1 (aggressively).
Recommended S / L ABOVE 1.12100
T / P 1.10500 (nearest), 1.10200 (prospective)
Projected profit up to 1600 points (more than $ 1500 per lot)
Predicted transaction duration 4-8 trading days
At the time of writing this forecast, the selling price (Bid) was 1.11364.
If possible, transfer S / L to profit. Acceptable profit taking on readiness.
I wish you all successful bidding!