France is ready to close the country

Financial and commodity markets analytics

Market Watch review. 28.10.2020

In today's release, we’ll cover the following topics:

  • France is ready to close the country. 
  • Increased demand for safe haven currencies. 
  • Canada to report on main interest rate. 
  • US oil reserves. 

Today we’ll start with some very unpleasant news. We have already noted a rapid increase in the number of cases in France. Only according to official data, more than 50 thousand people receive positive COVID-19 test results every day. Therefore, there is a high probability that today French President Emmanuel Macron will announce the closure of the country for a month to contain the spread of COVID-19.

This news puts quite a lot of pressure on EUR. So the EUR / USD currency pair has already reached 1.1750, having lost more than 100 points since the beginning of this week. The closest strong support for the pair is the narrow price range 1.1690-1.1700. But if a lockdown is announced in France, the pair may collapse much deeper.

Given the fact that the second wave of diseases is many times higher than the first in terms of the number of cases, the probability of a significant tightening of quarantine measures in Europe, and then in the United States, remains incredibly high. As a result, the demand for safe-haven currencies continues to increase. Thus, the USD/JPY currency pair updated its lows since the end of September against the background of increased demand for the JPY.

Shifting to the US trading session, all attention will be focused on the announcement of the results of the vote on the main interest rate of the Bank of Canada. The probability of its change is extremely low, but it is extremely difficult to completely exclude unexpected changes in the monetary policy of the Canadian regulator. Therefore, traders who trade the Canadian dollar need to take this risk into account.

I would also like to draw your attention to the upcoming publication of a report on changes in oil and oil products reserves in the United States. Unexpectedly strong inventory growth of 5 million barrels or more may put additional pressure on oil prices. At the same time, the main bearish fundamental factor is still the risk of declaring a total quarantine, as it was in March of this year.

The collapse in oil prices continues to put pressure on CAD, thereby returning the USD / CAD quotes to the resistance area of 1.3240-1.3250. Given the general strengthening of the USD and the prospects for further decline in oil prices, the risk of a more powerful growth of this currency pair remains quite high.

Closely monitor the news background and be prepared for all the surprises of the market.


Analyst

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