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07.04.202014:07 Forex Analysis & Reviews: EUR/USD: The euro is trying to ride a wave of positivity. However, the sea is not calm yet, and the bottom is still quite rocky

Long-term review

Exchange Rates 07.04.2020 analysis

The global markets have started the week higher due to the signs that the rate of the spread of the coronavirus is stabilizing.

The number of infected people in Italy, Spain and France is declining, and the death forecasts in the United States have fallen from 176,000 to 82,000.

Of course, this does not mean victory over the disease yet, nor an evidence of overcoming all economic problems. Nevertheless, it can be the starting point from which the markets will be ready to form the foundation for future growth.

Anyhow, the leading indicator from Bloomberg signals that the global recession may not be as serious as that of 2008, due to the rapid response of Central Banks and national governments to the coronavirus outbreak. The extreme monetary easing, as well as unprecedented stimulus, has eased the decline in stock indexes and allowed them to move away from the lows. The previously unseen restrictive measures were able to slow down the spread of the disease, which restrained the uncontrolled decline of markets, as well as reduced their volatility.

Another important factor was the pumping of liquidity by the regulators of the global financial system. Because of it, the Central Banks were able to raise the stock prices. However, note that the sea has not calmed down yet, and the bottom is still rocky.

"It is too early to talk about a decline in the coronavirus pandemic," experts at the Robert Koch Institute, which leads the fight against the disease in Germany, said. Similar statements came from representatives of other countries.

Exchange Rates 07.04.2020 analysis

Anyhow, the dollar is still inversely correlated with the demand for risky assets. The fact that the coronavirus pandemic affects the exchange rate of currencies is undeniable.

Thus, the reports indicating that the spread of the coronavirus all over the world is slowing down has reduced the demand for dollar, and provided support for euro.

Strategists from the Bank of America say that only a drop in the USD index below 96 will indicate that the troubles associated with the coronavirus are really behind us. Experts at Saxo Bank are skeptical whether the Fed's unprecedented measures will be enough to turn it down.

The EUR / USD pair has been under pressure for six consecutive days. Some glimmers of optimism about the pandemic has helped ease some of that pressure.

Technically, the pair is not eager to develop a "bearish" momentum. Sellers should wait for the breakout of 1.0770–1.0775, as only then will there be a decline in the direction of 1.0700, as well as in this year's lows at 1.0635.

The attempts to increase euro will likely encounter resistance in the area of 1.0900. The breakout of which may trigger a wave of short compression in the direction of the 50-day moving average in the area of 1.0970–1.0975, where from there, the "bulls" can take the course to the key mark of 1.1000.

Viktor Isakov,
Analytical expert of InstaSpot
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