Events circulating coronavirus do not allow markets to switch to positive from incentive measures (EUR/USD and USD/CAD pairs

The positive mood in the global financial markets at the end of last week did not last long, since the widespread spread of coronavirus in Europe and America held on to, if not panic moods, which have become almost normal over the past month, then tension is at its highest degree.

On Friday, trading in the US ended on the stock market with a decline in stock indices. In addition, the attitude of investors towards defensive assets has noticeably expectedly changed. The Japanese yen, Swiss franc, and government bonds, primarily the United States, began to be in demand again against the backdrop of growing negative sentiment at trading in the United States.

At the same time, there were no significant changes in the currency market on Friday, only volatility increased. The local weakening of the dollar has stopped, but on Monday, its growth is not yet visible. It seems that markets are weighing new information about the spread of coronavirus in Europe and America. Unfortunately, the number of sick and dead is increasing. For example, Italy has already surpassed China in terms of the number of infected and dead, and so far, this has not been seen.

As previously stated, we believe that market dynamics will depend entirely on the prevalence and consequences of the pandemic. If the markets had begun to somewhat shake at the end of last week, drawing attention to unprecedented stimulus measures from the world Central Banks and reacted to this with a sharp pullback, then on Friday, a new significant decline reminded who is leading in the markets and who really rules them. This morning, we saw a strong decline in futures for major US and European stock indices before the opening of trading in Europe. This means that Europe will open with a fall and this negative could also spill over into the mood of investors in the States.

Estimating the wide scale of various incentive measures from the global Central Banks, we believe that most likely, a certain balance will be most likely established in the main currency pairs. This is due to the fact that the measures taken tend to weaken the exchange rates of national currencies, therefore, none of them, possibly except for the yen, which is considered as a currency of refuge during a panic, will be preferred. In this case, we do not consider the dollar, which can receive demand, as shown by very recent events, but only in conditions of critically high panic moods and nothing more. If these do not arise, we can expect a side dynamics in the main currency pairs with sharp "shoot" either up or down in the wake of high volatility.

Forecast of the day:

The EUR/USD pair is trading in the range 1.0645-1.0780. There is a possibility of its decline to 1.0550, if it does not rise above the level of 1.0780.

The USD/CAD pair is trading near the level of 1.4425. It may turn down again if oil prices that started to rise do not change their trend. In this case, the price will decline to the level of 1.4200 with the prospect of a decline to 1.4030.

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