EUR/USD. Panic, and nothing but panic: buzz around the dollar pulls the pair to the bottom of the 6th figure

The euro-dollar pair again updated the price lows today: if yesterday the bears were able to reach only the bottom of the eighth figure, today they marked the low at 1.0695 (at the time of writing). Given the ongoing excitement around the US currency, the market began to discuss the probability of achieving parity – not only in euro pairs, but also in pairs with the pound, which fell by one and a half thousand points in a week and a half. The foreign exchange market still favors the dollar, despite positive news from China, where no new cases of coronavirus infection were detected at the local level over the past day. The infection has not completely left China – but now it is only "exported" from outside: all identified patients were infected outside the country.

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Many have called this fact a "turning point." Indeed, the authorities of a huge state managed to cope with the epidemic in a rather short period of time, while the total number of cases (about 90 thousand) looks scanty against the background of a half billion people. Most experts expected that 70-80% of the citizens of China would be affected by the coronavirus, but Beijing was able to curb COVID-19 with relatively small losses, especially given previous forecasts. China is gradually returning to a normal life, weakening rather strict quarantine measures.

Today's news from China halted the fall of EUR/USD. But not for long. The bulls of the pair were able to develop the correction until the middle of the 9th figure, but the sellers again seized the initiative at the end of the European session and with renewed vigor pulled down the single currency to the bottom. Traders, apparently, decided - the Chinese example, of course, is worthy of praise, but the rest of the world is not doing so well.

The number of cases of the disease continues to grow – at the moment, this figure exceeds 214 thousand people. The European Union, Turkey, Israel, and the United States have closed their borders – and this is not a complete list of countries with the "iron curtain". In many EU countries (in particular, in Italy, Spain, and Croatia), restrictive measures were significantly tightened, closing all entertainment centers, bars and restaurants, and schools. In some countries, only grocery stores, pharmacies, and gas stations are open. The British authorities also "woke up", where Covid-19 has already killed more than a hundred people. London was the last to introduce restrictive measures. But more than 40 metro stations will be closed in London today, all restaurants, clubs and catering outlets will be closed at the weekend, and schools will be quarantined from Monday. The situation is similar in Latin America – for example, Peru has even imposed a curfew. Moreover, in Brazil, in the wake of the spread of the coronavirus, protest movements against President Bolsonaro began. According to many residents, the authorities have long ignored the threat, as a result of which the number of cases has already exceeded half a thousand – and restrictive measures have not yet been introduced.

In other words, the situation is spinning in an upward spiral, so "Chinese optimism" had little impact on the overall mood of traders. Central banks of the world's leading countries continue to spend huge amounts on providing liquidity, but the availability of dollar financing remains tight. Yesterday, the European Central Bank announced an asset purchase program worth 750 billion euros, today the Bank of England at an emergency meeting again lowered the rate (to 0.1%) and increased QE by 200 billion pounds. In response to this move, the GBP/USD pair moved away from 35-year lows (for how long?).

But in general, the latest actions of central banks could not change the general mood of traders: the war for the dollar is still not subsiding – market participants are dumping other assets to invest in a safe greenback, provoking an unprecedented hype around the US currency. Actually, thanks to this fundamental factor, dollar pairs are setting records in recent days. All other circumstances are only auxiliary.

The whole problem is that the real scale of the consequences of the coronavirus COVID-19 for the global economy is still impossible to assess. Such uncertainty puts enormous pressure on investors who, in the current circumstances, recognize only one life buoy - the dollar. Treasury bonds, other government bonds, and even the traditional defensive instruments in the foreign exchange market, such as the Japanese yen and gold, fell under a wave of sales.

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There is no consensus on the market as to how long the US hegemony will last. Dollar bulls ignore the dovish decisions of the Federal Reserve, while government support programs from the US authorities only strengthen the greenback. Recently, the Lower House of Congress has already approved a package of measures to assist citizens of the country. After that, the senators, together with the Trump administration, began to discuss the third package of economic assistance. All these steps of Washington only cement the privileged position of the dollar in relation to other currencies.

Summarizing the above, it can be assumed that dollar bulls will continue to feel comfortable in all pairs - including paired with the euro. As long as the news flow regarding the distribution of Covid-19 is negative, the US currency will skim the cream. In the context of the euro-dollar pair, this means that in the short term, bears can reach the bottom of the sixth figure, sweeping away all technical barriers in its path.

The material has been provided by InstaForex Company - www.instaforex.com