After months of arguing, Democrats and Republicans managed to reach an agreement last week, regarding the enormous figure. Friday was a critical trading day as the stimulus plan passed through the House of Representatives and through the senate, both passing the "test" with flying colors. Presidents Obama's plan is now on its way towards its final step, one that will require the president to sign the bill into the U.S's law. As the new president has mentioned several times, the enormous package will contribute to the Feds recent monetary actions, adding fiscal methods to try to put the economy back on to a normal path. Through a mixture of tax cuts, government spending and aids to different states the plan is aimed at reviving the economy by providing approximately 3.5 million jobs.
In addition, officials from leading industrial nations met up in Rome over the weekend, concerned that developing countries will not be able to cope with the crisis. Recently authorized stimulus packages across the globe could help the more developed countries, but many are wondering who is going to aid the developing ones, especially as some of those countries managed to cross the line between poverty and development during the previous bull market. Due to the global downfall many of those countries have found themselves back at their starting point.
On the Forex market, the major currency pairs have been playing a game of "silence" over the last couple of weeks waiting to see the outcome of recently suggested fiscal methods. The Dollar index, calculated against an array of pairs, has been chopping around the 85-86 level as investors are now puzzled as to where to put their money. Up until a month ago investors were fleeing to the Dollar despite a declining interest rate, classing it as a safe-haven, while buying up Dollar associated assets. With the U.S now presenting a terrible yield and other banks stuck in the same type of boat, the markets have frozen as investors try to decide the best pairs to trade on. When analyzing the charts, one can see that most of the individual pairs have become stuck between support and resistance, as market players have lost their confidence, waiting for some kind of miracle to happen, giving a clear direction, yet again.
Now that all the major decisions have been finalized, will the currency pairs finally receive a direction, breaking out of recent consolidation patterns?
The upcoming week should present traders with exciting sessions as Monday's trading day should ignite movement on European crosses, driven by Friday's decision of the stimulus package. While the G7 meeting is normally a widely watched item among traders, one has to remember that a G20 meeting is due to take place in April, therefore the impact of this meeting on the market could be limited. In addition to the stimulus efforts the economic calendar is scheduled to release a wave of data, showing investors how the different economies are holding up. With the stimulus package out of the way trader's attention should slowly shift back to economic data, affecting the minor trend or stimulating breakouts. With the U.S market closed on Monday, most of the economic action will begin on Tuesday as protocols of recent interest rate decisions will be given by the RBA, BOE and the FED. In addition numerous economies will be releasing their inflation results which could show a further economic slowdown.
Technical Pictures
EUR/USD- Daily Chart
Despite a hectic week, influenced on a day to day basis by the stimulus package, the EUR/USD managed to hold its level trading around weekly support of $1.2750. This pair managed to break trendline resistance, but failed to gain strength lingering around recent levels. Thursday and Friday's candlesticks both formed doji candlesticks, supporting the uncertainty in the markets. Even though this pair is trading in a consolidation pattern, traders should watch for a break, especially as Bollinger bands are converging.
GBP/USD-Daily Chart
After bouncing off of upper trend line resistance the Pound devaluated last week, reaching trendline support. Friday's session managed to form an inverted hammer formation after Thursday's candlestick that found support at $1.4140. While further consolidation is expected on this pair, a clear break of either trendline will show a clearer direction.
USD/JPY-Daily Chart
After finding support around the 90 level, the USD/JPY managed to climb higher during Friday's trading session. Even though this pair has formed a classic swing pattern it is yet to breach prior highs, clearing resistance. Even though it is showing early signs of a change of trend, a follow through is needed to determine the change. 92.40 should be observed carefully as this level has caused problems in the past.
