EUR/USD. Success of scientists in the fight against COVID-19: anti-risk sentiment declined, the dollar loosened its grip

The euro-dollar pair failed to gain a foothold in the seventh figure, although yesterday it even approached the support level of 1.0750 (the lower line of the Bollinger Bands indicator on the daily chart). However, the price returned to the eighth figure during the Asian session on Tuesday, reflecting the uncertainty of dollar bulls. The pair shows a correction not due to the strengthening of the euro, but primarily due to the weakening of the US currency: the dollar index has been declining for several hours, heading to 99 points. This dynamics is due to the increased interest in risk, against the background of the latest news from the front of the fight against the epidemic. Although it is too early to talk about a turning point in the situation, some events allow us to look at the future with optimism.

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First, there are certain developments of scientists regarding the creation of a vaccine. In Australia, virologists announced a sensational statement that the antiparasitic drug Ivermectin is able to cope with Covid-19 in just two days – that's how long it took for this drug to defeat the coronavirus in a test tube. The results of this study have already been released in the Antiviral Research publication. Now it is necessary to conduct human trials – it is necessary to find out whether there is an effective dose of this drug that could be used safely for people. That is, the use of Ivermectin in the fight against coronavirus will depend on further preclinical and clinical studies. In other words, scientists have made a serious "bid to win" - and here it is worth adding that the above-mentioned antiparasitic drug has previously shown high effectiveness against the HIV virus, dengue fever, flu and zika.

Similar news came from Turkey. They tested the Covid-19 vaccine on animals and they developed antibodies. Now experts plan to test the new drug in humans. It also became known that American scientists have tested a vaccine against coronavirus in laboratory mice.

According to some experts, if we consider all these trials in aggregate, we can assume that the Covid-19 vaccine will appear in a few months – that is, much earlier than the previously announced deadlines (experts from the World Health Organization said that the reaction will not appear earlier, but in 12-18 months). Such prospects provided background support for risky assets, while the US currency ceased to enjoy increased demand.

It also became known that in several European countries – Italy, Spain and Germany – the number of deaths and new cases of coronavirus is steadily decreasing. For example, the Germans said yesterday that the number of new infections in their country has been decreasing for four consecutive days. In Italy, the lowest number of fatalities in the past two weeks was recorded on April 5. In addition, in this country, the number of patients who are in intensive care has decreased for the second day. And in China, more than one fatal case from Covid-19 was not registered in a day – for the first time since the beginning of the epidemic.

These trends have led governments in several European countries to begin preparing to ease quarantine measures. This information is unofficial – this is written by the British edition of the Financial Times, referring to its sources. According to them, France, Spain, Belgium and Finland are "among many" countries that have already set up expert committees to study the gradual reduction of quarantines and strict restrictions. It is highly likely that the quarantine will continue until the end of April, but the restrictive measures may be significantly relaxed in May. Especially if the positive trends regarding the spread of Covid-19 continue.

This news flow slowed the growth of the US currency throughout the market, as the demand for protective instruments decreased (gold, by the way, also shows a downward trend).

However, long positions on the EUR/USD pair are extremely risky at the moment. First, it is too early to say that the coronavirus has been defeated: despite some positive trends in some countries, the overall situation remains difficult: in particular, the number of deaths from the virus has exceeded 10,000 in the United States – this is the third indicator in the world after Italy and Spain. The head of the US health service has already said that the country should prepare for Pearl Harbor - that is, for many premature deaths. In France, 833 deaths from Covid-19 were recorded in the last 24 hours – the highest rate in the country for the entire time of the pandemic. In other words, many countries have not yet experienced the peak of the epidemic, so relatively rare news of an optimistic nature is drowned in the rest of the news stream.

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Secondly, the European currency is waiting for the results of the negotiations of the EU finance ministers. Let me remind you that representatives of Italy, France and Spain (that is, those countries where the largest outbreaks of the virus occurred) are lobbying for the introduction of so-called crown bonds. In turn, representatives of Germany, the Netherlands and Austria are against such an idea. Today, the ministers will try to agree on tools to support the European economy. If they can find common ground, the euro will receive significant support, since a second online meeting of EU leaders will take place on April 9 (i.e. on Thursday). If today's negotiations fail, the EUR/USD pair will return to the seventh figure again, despite the overall weakening of the dollar.

Therefore, if the day ends not in favor of the European currency, the pair may again approach and even test the support level of 1.0750 (the lower line of the Bollinger Bands indicator on the weekly chart). If the negotiations are successful, we will see a correction-up to 1.0940 (the average line of the Bollinger Bands is already on the daily chart).

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