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As expected, the USDCNH pair is going to experience high volatility in the coming week. The People’s Bank of China announced a rate cut from 2.4% to 2.2% as a pre-emptive move to avoid a financial crisis in the country. The central bank also joined a worldwide monetary easing wave of 50 billion yuan, or 7 billion dollars into the banking system. Investors can look forward to a further rate cut from the Chinese bank as part of their support on the global economy. Despite its help on the worldwide economy, however, investors have their eyes on the country’s manufacturing purchasing managers index. Its factory activity fell to its weakest reading on February 29 led by the coronavirus. Meanwhile, the market is also holding its breath on the United States’ pending home sales for the month of February with low expectations. The US is expected to see short-term gains following the rate cut, but the Chinese yuan may soon follow.
Business consents and business confidence figures in New Zealand are expected to be low for the month of February due to concerns about how much the coronavirus will leave a mark on the country. If the figures see positive gains after the bird’s announcement later today, the pair might see itself inching back into its previous support levels, short-term. However, greenback might see gains against the kiwi much later after the Reserve Bank of New Zealand announced its decision to implement a Large Scale Asset Purchase program of New Zealand government bonds to help support its economy. The US saw losses even after its massive stimulus package and quantitative easing. The markets are doubting USD selling, since US pending home sales are also expected to lower for February due to a historic surge in unemployment. Key players have suspended purchasing new homes and reduced its pace of acquiring homes over the past month.
The Kiwi is expected to tread lower against most major currencies this week, heightening the possibility of it lowering against the euro. The Reserve Bank of New Zealand offered to repurchase corporate paper from banks to continue lending. Markets don’t expect much from its Business Conifidence, to be announced later today over concerns about the coronavirus affecting its local economy. If the figures surprises investors with a higher figure, it may help investors to trade for the CNH-alternative currency against the Euro. Meanwhile, the Euro’s quantitative easing and interest rate cut program is brewing and waiting to take effect in the market. The European Central Bank announced earlier today that it asked euro zone banks to freeze dividend payments at least October of this year to preserve liquidity that helps households and companies through the coronavirus crisis.
The USDCHF pair saw a deep V pattern with two break outs beginning early February. The American dollar saw a one-week loss against the franc, but halted when the Federal Reserve launched its quantitative easing program. The approval of the US Congress’ plea to release a $2.2 trillion economic stimulus package led investors’ optimism on the dollar, as well as US equity futures undermining demand for traditional safe haven currencies like the Swiss franc. The pair’s high volatility is mostly derived from investors’ worry of the dollar after the US announced record-breaking unemployment rates last week. For now, it looks like Switzerland’s KOF leading indicators index will help investors root for the franc with a higher-than-expected reading of 92.9 against the anticipated 81.6. If, however, the US shows high readings for pending home sales later today, the USD might see itself seeing bulls by the end of the week.