Traders of the euro-dollar pair continue their struggle. Buyers are trying to gain a foothold above the 1.0850 level, while sellers, in turn, are trying to return to the seventh figure. Neither bulls nor bears have any significant arguments for a price jump, and the information background for the pair is contradictory. Therefore, the pair is staying in the flat, waiting for the April meetings of the Fed and ECB (they will be held on Wednesday and Thursday, respectively) and news from North Korea.
The EUR/USD pair's correctional growth at the beginning of the week is due to a decrease in anti-risk sentiment in the market. Traders respond to the dynamics of the spread of coronavirus: the gradual extinction of the epidemic allows the authorities of many countries to ease quarantine restrictions, thereby resuming economic processes. This process is slow and uneven - but the less common trends indicate a gradual exit from the global lockdown.
For example, 413 deaths from Covid-19 were recorded in the UK over the past day - this is the lowest figure since last month. The lowest daily rate of deaths from coronavirus over the past five weeks was also recorded in France - 242 died from complications in 24 hours. Over the past day, 1730 new cases of infection were recorded in Italy - this is the lowest figure since March 10. In general, according to experts of the European Center for Disease Prevention and Control, the first wave of infection has already passed its peak in 20 countries of the European Union, and the number of new cases is decreasing. Many EU countries relax quarantine measures - in particular, we are talking about Switzerland, Austria, the Czech Republic, Lithuania, the Netherlands, Norway, Denmark, Germany. Cautionary steps in this direction are made by Spain and Italy.
On the one hand, the situation remains difficult in the United States - the country still ranks first in the number of cases (according to the Johns Hopkins University, almost a million infected were registered there, 56,000 people died). Nevertheless, President Donald Trump said at a briefing yesterday that the situation with the spread of the epidemic in the country is improving. According to him, the number of cases in New York, New Orleans, Detroit, Boston and Houston is declining. In addition, the situation in Washington, Denver, Seattle, Indianapolis, St. Louis is "stable", and the number of infected is also declining.
Such an information background provoked an appetite for risk - because if the current dynamics continue, then the world economy could begin to regain its position by the second half of the year. The existing fundamental picture made it possible for EUR/USD bulls to return to the eighth figure and even test the key (at the moment) resistance level of 1.0850. However, buyers could not advance further, and so the price returned to the bottom of the eighth figure during the Asian session today.
It is noteworthy that traders do not risk opening large positions (both in growth and decrease) not only because of the Fed and the ECB, whose members will hold their meetings this week. A certain nervousness in the market is provoked by the situation with Kim Jong-un, who was deemed "lost" on April 11th. Uncertainty on this issue puts background pressure on the market, reducing risk appetite. A change of power in a country such as the DPRK entails a reformat of many domestic processes, primarily in the military sphere and in the sphere of foreign policy.
Let me remind you that, having stood at the helm of the 25 millionth state, Kim Jong-un conducted four of the six nuclear tests, including the largest in September 2017. North Korea also tested almost a hundred ballistic missiles under his leadership, that is, three times more than with its predecessors. But two years ago, Kim Jong-un announced a change in strategic course and even met with the American president. Although negotiations on the DPRK denuclearization subsequently came to a standstill, the fact remains that Jong-un is (was?) the most liberal leader in the country, at least in comparison with his father and grandfather.
What kind of policy will be pursued by his successor (according to rumors, his sister Kim Yo-jong may lead the country) is an open question. And the uncertainty in this matter retains general nervousness in the foreign exchange market. Yesterday, representatives of South Korea announced that, according to their data, Jong-un is "alive and well" - he is allegedly undergoing a rehabilitation course after the operation. On the other hand, the North Korean leader still does not appear in public - state-owned media only report that the head of state is "working." An ambiguous statement was made yesterday by Donald Trump. According to him, he has an accurate idea of how Kim Jong-un feels now, "but cannot speak on this subject now." At the same time, he expressed the hope that the North Korean leader "is doing well," adding that "soon you will also find out the truth."
Thus, the fundamental picture for the EUR/USD pair is ambiguous, especially on the eve of the April meetings of the Fed and the ECB. Slowing the spread of the epidemic provides background support to the bulls of the pair, but if the rumors about Kim Jong-un's death are confirmed, then the anti-risk sentiment in the foreign exchange market will significantly increase, and EUR/USD buyers will lose their positions. At the moment, it's better to take a wait-and-see attitude for the pair, especially in the light of information announced by Trump regarding the state of health of the North Korean leader.
