U.S. Markets Mixed Amid FED, Treasuries Testimony

Posted Tuesday, May 19, 2020 by
Shain Vernier • 2 min read

U.S. markets have been flat today, following one of the best performances in months. Just past the halfway point of the trading day, the DJIA DOW (-75), S&P 500 SPX (0), and NASDAQ (+56) are mixed. Investors appear content on the sidelines as FED Chair Powell and Treasury Secretary Mnuchin are testifying before Congress. The primary topic is the handling of the $2 trillion dollar COVID-19 economic relief package.

Powell and Mnuchin’s comments have done little to sway the markets. The biggest news has been the launch of the FED’s $600 billion Main Street Lending Program planned for late-May. In addition, Mnuchin alluded to the fact that the Treasury is “fully prepared to take losses” from its emergency loan programs. 

Today’s testimony is basically a recap of the planned economic relief programs. To sum things up, more liquidity is on the way and should be getting to American businesses within the next several weeks. Thus far, the markets are taking the news in stride.

Markets Quiet Following Monday’s Rally

Pending inflation is one of the big questions that most forex traders have regarding the massive U.S. stimulus packages. While deflation is the story right now, it’s difficult to imagine a scenario where the Greenback doesn’t lose purchasing power in the next 12 to 18-months. That has been the story this week versus the euro, with EUR/USD rates rebounding to the 1.0950 handle.

EUR/USD, Weekly Chart
EUR/USD, Weekly Chart

Here are three levels to watch in the EUR/USD for the remainder of the week:

  • Resistance(1): Weekly SMA, 1.0943
  • Resistance(2): Bollinger MP, 1.0997
  • Support(1): 78% Current Wave, 1.0748

Bottom Line: If the EUR/USD continues its rally of the past few sessions, a shorting opportunity may come to pass. Until Friday’s closing bell, I’ll have sell orders queued up from 1.0994. With an initial stop loss at 1.1026, this trade produces 25 pips on a sub-1:1 risk vs reward ratio.

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