On Wednesday the 24th of June, trading on the euro closed down. The EURUSD pair dropped by 0.5% to reach 1.1250. From its high of 1.1349, the euro shed a total of 99 pips. The financial market situation took a sharp turn for the worse on the back of news about COVID-19, which stoked fears of a second wave.
In California, Texas, and Arizona, authorities have reported record numbers of new infections, as well as record numbers of hospitalisations. Some other countries also recorded spikes in new cases. New York and New Jersey have imposed self-isolation restrictions on people coming from states with high infection rates. The EU is considering limiting flights from the US.
WHO chief Tedros Adhamon warned that in the next week, the number of confirmed coronavirus cases will reach 10 million. We believe that this figure will be reached this week considering that the current figure is 9.5 million, 5.5 million of whom have recovered.
In other news, the US plans to impose tariffs on goods from the UK, France, Germany, and Spain to the tune of 3.1bn USD, which also took its toll on investors. This is the culmination of a long-running dispute between the US and EU regarding subsidies for aircraft manufacturers.
This all resulted in investors ditching risky assets in favour of the US dollar and yen.
Day’s news (GMT+3):
- 13:00 UK: CBI distributive trades survey - realised (Jun).
- 13:30 UK: MPC meeting minutes.
- 14:30 Eurozone: ECB monetary policy meeting accounts.
- 15:30 US: durable goods orders (May), GDP (Q1), trade balance (May), initial jobless claims (19 Jun).
In today’s Asian session, traders hit a fresh low of 1.1237. Take note of how the media sways the crowd with its news reports. The situation regarding COVID-19 hasn’t improved at all, but investors believed Larry Kudlow’s claim that there is no second wave and that no more restrictions would be put in place. In actual fact, on the 23rd of June, the US saw 36,120 new coronavirus cases.
Considering that our pair has dropped from 1.1349 to 1.1236 without any pullbacks, the current momentum should be enough to take it to the 112th degree before the US session gets underway. At the time of writing, the euro is trading at 1.1241. Since the 90th degree isn’t providing any significant support, we expect the pair to drop to the reversal zone between 1.1190 and 1.1217.
Expect surges in volatility from 13:30 to 14:30, when the Bank of England and ECB will publish the minutes from their latest meetings. These are causes for uncertainty among both the bulls and bears.