Market turbulence and first victories over coronavirus

Coronavirus continues its disruptive activity: yesterday, the markets again fell into a zone of severe turbulence amid another surge of panic. One of the reasons for the panic was a publication in Forbes magazine, where the results of a closed meeting of Goldman Sachs experts were published. According to them, half of the US population and 70% of German citizens are at risk of contracting COVID-19. Although 80% of those infected will have a mild form of the disease, the average death rate will be up to 2%. Currency strategists also predicted that the epidemic is in its infancy, and the peak is expected in about two months. Global growth will slow to 0.9%, which is comparable to the indicators of the post-crisis 2009.

Due to this fundamental background, the dollar became the undisputed and most valuable favorite of the currency market, while other assets fell into the abyss. Perhaps, the past day will become a champion of anti-records. The pound reached a 35-year low against the dollar, marking the first time since the 80s of the last century in the area of the 14th figure. The Australian and New Zealand dollars marked 17-year lows. The Norwegian krona reached a record low, and the Canadian dollar fell to the lows of 2016 (reaching the 41st figure in a pair with the greenback). The Chinese yuan is also getting cheaper, firmly anchored in the area of the 7th figure in the pair with the US currency. Overall, the dollar index exceeded the 100-point mark for the first time since 2017, reflecting huge demand across the market.

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Against the background of such events, the oil market once again collapsed. The price of a barrel of Brent crude fell to a 17-year low (the price fell below $25), while WTI fell below $25 per barrel for the first time since June 2002. The stock market was also scared yesterday. Trading on Wall Street was once again partially suspended after the Dow Jones index fell below 19,500 points. In general, the main US stock indexes boosted the fall to 8-10%. In particular, the NASDAQ index of high-tech companies fell by 8.3% (to 6,725. 16 points), and the S&P 500 – by 9.3% (to 2293.38 points).

The emergency measures taken by the Federal Reserve and the European Central Bank yesterday had little impact on the overall situation: the panic was stronger. Nevertheless, the actions of regulators were able to stop the fall of the euro-dollar pair – buyers of EUR/USD were even able to afford a short-term correction to the middle of the 9th figure. Following an extraordinary meeting, the ECB decided to launch a 750 billion euro securities repurchase program to support financial stability. The package of measures includes temporary purchases of private and public sector securities until the end of this year. According to a communique published by the regulator, the volume of purchases will be carried out "in a flexible mode, without fixed targets." The ECB clarified that the adopted program can be completed ahead of schedule, when the "crisis stage in the spread of coronavirus" remains behind, but in any case – not before the end of 2020.

The Federal Reserve, in turn, has launched a credit line for the Primary Dealer Credit Facility (so– called primary dealers) - under this program, not only bonds, but also shares can act as collateral for loans.

Meanwhile, the number of cases of coronavirus in the world continues to grow. At the moment, this figure exceeds 214 thousand people. In Italy alone, there were 475 deaths from COVID-19 per day yesterday. A total of 2,978 people died in the country during the epidemic.

But, oddly enough, positive news began to appear amid the general pessimism and panic. For example, over the past day, not a single new case of the disease was recorded in the very center of the epidemic - in Wuhan, China. This happened for the first time since the first infection. In total over the past day in a billion and a half China, only 13 cases of infection were recorded. At the same time, 12 infected brought the coronavirus from abroad, only one picked up the virus in their country. Beijing is gradually beginning to abolish quarantine measures, restoring the country's normal operation. The Chinese begin to transfer the accumulated stocks of medical equipment to the countries of Europe and Asia, in which the epidemic has developed.

Despite the forecasts of many European leaders that 70% of the population will be ill with coronavirus, the epidemic did not exceed 90 thousand people in China. Not a single case was detected in most regions of the countries. Tough quarantine measures and a complete ban on leaving the house were applied only in the outbreak - Hubei Province. There, bans were introduced for citizens to leave the house, while the authorities completely provided life support and the delivery of everything necessary directly to the house. Currently, the entire population of China is provided with tests for coronavirus, so the epidemic is taken under full control. In addition, yesterday in the Chinese media announced the high efficiency of a new experimental vaccine against coronavirus, which was developed by Japanese scientists and tested on Chinese patients. Similar tests on volunteers are conducted in Seattle, the United States.

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In addition to relatively good news, you can add news from South Korea – 407 people recovered there in a day, and 152 got sick, that is 2.5 times less. Even in Italy, which is the epicenter of the epidemic in Europe, the number of people who have recovered is gradually increasing – compared to the initial trends.

Of course, it is still too early to talk about any global change in the situation around the world. But the fact that China was able to rein in COVID-19 speaks volumes. Many currency pairs – including EUR/USD - are trying to regain lost positions from the dollar this morning, including due to news from China. The nearest target of the pair's corrective movement is 1.0980 (the lower limit of the Kumo cloud on the daily chart). But the task of the EUR/USD bulls is to return above the average line of the Bollinger Bands indicator (that is, above the 1.1050 mark). Only in this case it will be possible to speak carefully about the turning point of the situation. The support level is this year's price low of 1.0802.

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