The currency market is gradually returning from suspended animation – traders have returned from the Easter holidays and are playing back the events of the previous days. Meanwhile, the decline in anti-risk sentiment turned against the US currency: the dollar index turned down and is now drifting at the base of 99 points, amid a general decline in demand for defensive assets. The dollar pairs have also changed their configuration, following the latest trends. And although price movements are not impulsive, the dollar is under certain pressure in all pairs of the "major" group. On the other hand, the financial world is blowing up or figuratively speaking, is "letting off steam" after several weeks of price turbulence and crazy excitement around the US currency.
The EUR/USD pair cannot be ruled out. The buyers crossed the middle line of the Bollinger Bands indicator on the daily chart, which coincides with the Tenkan-sen line, and are now trying to break through the intermediate resistance level of 1.0950. The main (nearest) resistance level is higher - at around the level of 1.1050 - this is the Kijun-sen line on the daily chart, and the middle line of the Bollinger Bands indicator is on the weekly. However, in order to approach the indicated price target, the EUR/USD bulls must enter the 10th figure first, and for this to happen, certain efforts and the corresponding news background are also required.
Here, it can be noted that the euro/dollar pair completed the last trading week on a major note – the Eurogroup members agreed on a package of anti-crisis measures by 540 billion euros, and OPEC + club members tentatively agreed on a reduction in oil production. Nevertheless, traders left for the weekend with disappointment, since there was a certain understatement in each case. In particular, the finance ministers of the EU countries rejected the idea of Italians (and the French and Spaniards who joined them) to issue so-called "corona bonds". The Germans were able to insist on their own, and enlisting the support of the leaders of Austria and the Netherlands, Finland and Estonia they said a categorical "no" to the proposal to release the corona bond.
Actually, that's why the euro/dollar pair didn't increase: the leaders of the EU countries should approve the plan for helping the eurozone economy at the repeated online summit (the date has not yet been determined), so it's too early to put an end to this. In view of such circumstances, traders express cautious optimism, but are not in a rush to open large positions in favor of the euro.
As for the oil market, the situation was also incomplete at the time of the end of Friday's trading. The Minister of Energy of Mexico left the OPEC + meeting as a protest, after which the agreements reached were in jeopardy. Only thanks to the mediation of Trump, the Mexicans managed to persuade to join the agreement, and on "favorable" terms, it would be necessary to reduce production by only 100 thousand barrels per day, while the initial requirements were much higher - 400 thousand barrels per day. Washington was able to solve this problem by promising to take over the 300,000 barrels of cuts per day due to Mexico. OPEC + members agreed on the final deal only on Sunday.
Thus, the fundamental background for the EUR/USD pair is not unambiguous. On the one hand, there is a general decline in anti-risk sentiment in the currency market, due to the equalization of the situation in the black gold market. On the other hand, a slow burn conflict over the introduction of corona bonds could flare up again at the repeated online summit of EU leaders, and this fact puts background pressure on the euro. This means that the growth of the EUR/USD pair depends only on the degree of vulnerability of the US currency, which in turn, responds to the news flow regarding the spread of coronavirus in the world.
In addition, the situation here does not look unambiguous. In some countries, doctors fix the so-called "plateau" (when the epidemic reaches its peak level). There is a positive situation in some states, however, in a number of countries - primarily in the USA, coronavirus continues to strike hard.
For example, the number of victims of the epidemic in Italy on Monday was one of the lowest in recent weeks; the number of people admitted to hospitals in general and to intensive care is steadily decreasing. Although in terms of the total number of deaths, this country is ahead of all other EU countries (more than 20 thousand deaths). Nevertheless, the Italians went to a slight relaxation of the strict restrictions - in particular, there will open shops selling office supplies or goods for babies. The French also report a slight decrease, a small daily decrease in the number of patients in intensive care is recorded for the fifth day in a row. But the situation remains difficult, so yesterday, Emmanuel Macron extended the quarantine until May 11. But in Spain, the quarantine regime was decided to weaken a little. In this country, the lowest daily increase in the number of people infected has been recorded in three weeks. The Spanish authorities gave permission to resume work at some industrial enterprises and construction sites.
The worst situation remains in the United States, which continues to be the world leader in the distribution of Covid-19 - there are now 585,155 confirmed cases. But, despite such impressive figures, Donald Trump expressed a certain optimism in his last televised address. According to him, there were no jumps in infection throughout the country during the weekend - hospitalizations are slowing down in hot spots such as New York, New Jersey, Michigan and Louisiana. This suggests that quarantine measures are working, and according to the head of the White House, the United States is following a better scenario than previously predicted. Such optimism also contributed to a decrease in anti-risk sentiment in the currency market.
Thus, the market must form its attitude today towards the American currency: either traders, amid the spread of Covid-19, will panic again and begin to buy up the dollar, or will show an additional interest in risky assets, thereby supporting the EUR/USD pair. As a result, it is advisable to open long positions for the pair when consolidating above the level of 1.0950. In this case, purchases can be considered with the main upward target of 1.1050 - this is the Kijun-sen line on the daily chart, and the middle line of the Bollinger Bands indicator is on the weekly.
The material has been provided by InstaForex Company - www.instaforex.com