Global stock exchanges are trading in the green zone amid reports that the spread of Covid-19 may be approaching a peak and the first signs of a slowdown appear. S & P500 added 6.72% on Monday. As a result, Europe is trading with a growth of 2-4%, which indicates a strong psychological fatigue of the markets.

At the same time, we must assume that even a slowdown in the spread of coronavirus will not have a stimulating effect on the markets. The effect will be temporary, since the world economy is entering a deep depression, the origins of which do not depend on the coronavirus, but are of a deep systemic nature.

EUR/USD

Sentix notes that the eurozone economy is already in a deep recession. The situation is worse than in 2009. The economic activity is at historically low levels, the index of the current economic situation is estimated at-66p, which is an absolute anti-record for all the time of observations, the overall index fell to -42.9 p, which is already lower than in 2009.

In addition, assessment of the current situation of -51.75p has no analogues in history and is an absolute minimum since the beginning of data collection in 2003. The rate of change is such that Sentix already estimates the situation much worse than in 2009, and argues that economic forecasts underestimate the depth of the fall.

Germany's eurozone locomotive is also in a deep recession, and this primarily concerns negative trends in the industrial sector. The level of recession has not yet been felt, since the state is fulfilling its obligations to provide social support to workers, and these measures are regarded as temporary in the public mind.

At the same time, investors still see strong potential for the recovery of the euro. The CFTC report showed that the cumulative long position in the euro against the dollar is currently the maximum among the G10 currencies, speculators assume that the euro will be noticeably higher than the current level over the next few weeks.

What can be associated with such expectations? One of the most obvious explanations is that the outcome of carry trade operations will continue and a further decline in the global economy will lead to an increase in demand for funding currencies when exiting risky assets.

The panic has somewhat subsided since March 30, so the illusion has arisen that stabilization is coming, but this impression is misleading. After the pullback, there will be a new wave, and the euro will be in strong demand again. The 1.0650 / 70 base is formed with a high probability, and now the goal is to move to the level of 1.1145, the local maximum of March 27. After passing this resistance, the euro will rise to the area of 1.1400 / 50. This is the most likely scenario.

GBP/USD

The British pound has no serious prospects for the continuation of growth. Despite the fact that the dollar has looked quite weak in the past week, the pound has no internal reserves. The economic situation differs little from the situation in the eurozone - PMI in the services sector fell to 34.5p and there is a slowdown in the construction sector to 39.3p.

On the other hand, the Brexit issue has faded into the background, but we must not forget that it is necessary to conclude a trade agreement with the EU before the end of the year, although it is already obvious that the timing is unrealistic. In addition, in the structure of calculating the fair value of the pound, there is a rather large raw material component. And contrary to the euro, a drop in the cost of raw materials, primarily oil, is a bearish factor for the pound and neutral for the euro with a slight margin in the bullish direction. According to the CFTC report, there is also no reason to believe that speculators are counting on the growth of the pound.

Resistance zone 1.2470 / 2500 can only decline if the negotiations of OPEC+ with US participation give grounds to count on an agreed limitation of world oil production. If the agreement is not reached, the pound will go further down, since the publication on Thursday of industrial production data and the GDP forecast from NIESR will most likely be extremely negative. In this case, GBP/USD updated the local minimum of 1.2160 and went to the psychological support of 1.20.