Investors prefer to ignore the risks of a second wave of the coronavirus outbreak. Meanwhile, repeated outbreaks of COVID-19 have been reported in China and South Korea. In the coming weeks, the European countries may face the same situation. For instance, Spain has already opened its beaches. Most likely, the locals won't walk around the Atlantic coast in masks and gloves, keeping safe social distance.
It has become clear now that it will take long time before the pandemic could be fully eliminated. Therefore, its negative impact on the global economy will be long-lasting and deep. Repeated outbreaks of coronavirus will certainly cause another wave of sell-offs in high-yield and risk assets.
Market participants are currently focused on geopolitical tensions. In particular, China is trying to tighten control over Hong Kong. While the United Kingdom, Canada, and Australia are concerned about this situation, the United States is increasing pressure and threatening with sanctions. The UK, meanwhile, announced its readiness to support the United States in the trade war.
In addition, the leader of North Korea, following the rumors about his death spread by the American and Japanese media, appears to be safe and sound and was last seen presiding at the nuclear program development meeting.
The US dollar was showing signs of weakness amid rising risk appetite. Still, it managed to show moderate growth against the basket of major currencies.
USDX
It is worth noting that on Friday the yuan fell to record levels in 12 years. Notably, speculators who had previously relied on the dollar decline were disappointed and changed their mind which is confirmed by CFTC data. At the moment, the bearish sentiment prevails in the British pound and the Japanese yen. The latter was supposed to strengthen on the negative information background, but this did not happen. Probably, the markets are waiting for new monetary incentives from the Bank of Japan.
Overall, the USD/JPY pair is losing ground. It is best to open long positions on the pair below the mark of 107. Now that the pair is holding above 107.5, the situation is uncertain. The growing tensions in the region may outweigh the plans of the Central Bank of Japan. So far, profit taking remains the best option.
USD/JPY
The speculations about negative rates may undermine the position of the pound. However, not all market participants are so pessimistic about the cabel. The bearish sentiments on the British currency supported by the lingering negotiations on Brexit do not reflect the real fundamental factors. Institutional problems in the European Union are much more dangerous now. So far, the pound remains one of the major currencies on which the Central Bank's rate is still above zero.
The Bank of England is widely expected to cut interest rate. The mere fact of easing monetary policy may stimulate an influx of liquidity into the debt market. This is likely to support the sterling as traders will close short positions on it. So you can consider buying the pound during its correction against major currencies.
GBP/USD
The single European currency has not got any clear direction yet. Hopes for progress on support measures for the European economies affected by the pandemic have waned. At least now, no positive changes are expected in this regard. So, the EUR/USD pair remains in the sideways channel with the boundaries at 1.08–1.10.
Both fundamentally and technically, the pressure on the pair persists. There may be some favorable moments for placing buy positions, but it is worth considering their limited potential. The situation may change only if the pair closes above the level of 1.11.
Important statistical data for EUR/USD will be released today and will include the US Consumer Confidence Index issued by the Conference Board. In May, the indicator is expected to grow to 87.1 points from 86.9.
Today, the pair has developed another descending wave to the level of 1.0770, and this is only half the way down the trend. The estimated downward target is set at 1.0520.
EUR/USD
