The demand for risky assets increased significantly, after the reports that one of the US biotechnology companies conducted the first successful phase of testing the coronavirus vaccine. According to Moderna, clinical trials of the vaccine ended with positive results. The test, which began at the end of April this year on volunteers, showed good results, with the number of antibodies of test participants exceeding the needed figures in the blood of people who had COVID-19, after taking the mRNA-1273 vaccine. But more importantly, the vaccine is safe and tolerable without complications. The final stage of testing will be held in July this year.
Such news increased optimism among market participants, which led to the intraday strengthening of many risky assets, even despite the terrible fundamental statistics, as well as the risk of a re-outbreak of the pandemic after the lifting of quarantine measures.
Some US states already started to ease quarantine restrictions. However, it will still take a long time to completely eradicate it, as it is necessary to observe first if a re-outbreak will happen after such changes. Meanwhile, the number of infections worldwide has exceeded 4.7 million, and the United States accounts for one third of all global cases.
The US president said yesterday that he is ready to completely stop financing WHO. He said that the US may reconsider its membership in the organization only if it fulfilled Washington's demand within 30 days. This is a review of the WHO response rules, as well as the independence of China from the organization. Such is most likely done with the aim of further pressuring Chinese authorities, from which the US president is seeking permission to conduct his own investigation on the cause of the coronavirus outbreak in Wuhan.
Meanwhile, Fed Chairman Jerome Powell made a speech yesterday, in which he made similar statements to those that were before. Powell said that the Fed is ready to use all the tools to help the economy, but the help from the regulator is only part of the wider measures that the US government should resort to. It means that rates will remain low for a long period of time, and the stimulus programs of the Fed will begin to gradually decline only after the current crisis is overcome. Powell also drew attention to the unprecedented economic recession occurring right now, since the burden of the crisis fell on those who were least able to bear it.
Looking at the data awaiting for us in the 2nd quarter of this year, as well as the increase in unemployment caused by the pandemic, coping with the economic consequences of the virus will be quite difficult. Such facts make the recent $ 3 trillion bill proposed by the Democrats look not so absurd.
US Treasury Secretary Steven Mnuchin also released a statement yesterday, saying that the presidential administration is ready to provide necessary measures to support the economy. The ministry currently holds $ 259 billion, and is ready to fund new and existing programs to help businesses, households and the economy. Mnuchin also mentioned the successful testing of the coronavirus vaccine. At the moment, the important tasks of the government is to ensure the safe return of people to jobs, and prevent a re-outbreak of the pandemic.
The 3 trillion bill mentioned above will most likely remain on paper, since after the House approved this initiative, the Democrats will most likely fail to push it through the Senate, as the majority there is controlled by Republicans. Political reasons are a huge factor of such, since the election race is about to begin in the United States. Republicans have already accused Democrats of trying to manipulate through the proposed assistance program.
As for the technical picture of the EUR / USD pair, yesterday's breakout of the resistance level of 1.0890 led buyers of risky assets to build a new upward trend, which may return the trading instrument to the 10th and 11th figures. To do this, a consolidation above the resistance level of 1.0925 should occur, which will lead to a more powerful increase to the highs of 1.0980 and 1.1020. However, if the demand for risky assets decreases, bulls will have to protect the 1.0880 support.
GBP / USD
The British pound also increased after the good news on the vaccine. However, it is not enough to save the British economy from the problems that await it in the future. Meanwhile, discussions on negative rates arose yesterday, after the recent statements of the Bank of England clues on a reduction of interest rates. However, such a measure is unlikely to be effective, since negative rates only make lending more difficult. A zero interest rate is the most effective solution instead.
As for the technical picture of the GBP / USD pair, a break of the resistance level of 1.2220 will most likely lead to a new wave of demolition of sellers stop orders, and a huge increase of the pair to the area of 1.2330, from where large sellers will begin to actively operate. To build an upward trend, the pound needs to return the quotes to the support area of 1.2130. Bulls need to hold the quotes in this area to build the lower border of the new upward channel.
