The second wave of the collapse in the crude oil market we are currently seeing, has completely turned the attention of investors. But interestingly, this tragedy is still local and cannot fully defeat the emerging market situation in general.
The decline in crude oil prices, although it has a noticeable effect on other segments of the financial market – stock, currency, and also indirectly on the debt market, is not leading and has a comprehensive impact. For example, stock markets, of course, react negatively to this event, nevertheless, the main decline is observed in papers related to the commodity sector, with some receiving support. First of all, these are pharmacological and food companies. Here, the published statements of companies for the 1st quarter play an increasingly important role. We believe that in this regard, the activation of OPEC ++, aimed at more stringent regulation of crude oil production in accordance with the current situation, will lead to the resumption of a strong speculative increase in prices for "black gold".
The currency market in the current situation remains as it were. There are no noticeable movements on it. The ICE dollar index is at 100 points, but slowly begins to stretch out in a line. This behavior is typical in situations where the positive factors for the US dollar exchange rate are largely offset by negative ones. Positive is the current perception of the dollar, which is the world's reserve currency as a safe haven in extreme situations. Even the yen and the franc actually froze against the dollar, consolidating in the lateral range.
The negativity for the dollar is its wide supply in the financial system against the background of large-scale and unprecedented incentive measures in the history of the Fed and the US Treasury. We believe that as the influence of coronavirus will weaken, on the one hand, naturally, and on the other, amid tough precautions and finally the invention of a medicine against this infection already closer to autumn, the negative factors will take over the positive ones and the dollar will be under pressure.
In addition, do not forget that cash investors who are in a situation of weakening pandemic pressure will seek investment ideas that will support the demand for risk and weaken the dollar.
Forecast of the day:
The AUD/USD pair is recovering after yesterday's decline in the wake of rising demand for risky assets. We believe that if it breaks through the level of 0.6370, it will rush to 0.6445, implementing the continuation of the trend "descending flag".
The USD/CAD pair is trading below the level of 1.4180. The collapse in crude oil prices did not lead to a similar decline in the Canadian dollar. We believe that the restoration of positive moods today can serve as the basis for a local decline of the pair to the level of 1.4000 and to 1.3860 in the future.
