EUR/USD: 1.08 in focus as dollar falls after Fed goes nuclear
EUR/USD caught a solid bounce yesterday as the Fed goes nuclear by announcing unprecedented measures to backstop the US economy and began open-ended QE operations.
That sent the dollar tumbling before the greenback recouped losses towards the end of the day, with EUR/USD backing off after testing its 100-hour moving average. Sellers look to be trying to retain control but for how long can they fight off the Fed move?
Today, the dollar is once again weaker across the board with EUR/USD testing the 1.0800 level and is threatening a move back above the 100-hour moving average at 1.0792. Further resistance is then seen around 1.0828-31 and a break above that will see buyers start to seize back more near-term control.
For now, the question for traders is whether or not the Fed has done enough despite throwing the kitchen sink at the problem. Among the beneficiaries is gold, as more flows will start to look towards bullion rather than the dollar, so the hope for the Fed is that this will help to ease dollar funding pressures.
However, as the virus outbreak continues to eat at the world economy, the dollar retreat and risk breather for now may prove to be just a temporary reprieve if the problem carries on for much longer over the next few weeks.
As for EUR/USD, the key line in the sand for trading today is the 100-hour moving average near the 1.0800 level.