The session started with a clear bias towards risk aversion driven to some extent by Germany's weak foreign trade data; the trade balance surplus fell to 3.2 Billion compared to the expected 10.0 Billion.
The European and North American stock markets suffered losses during the European session and then recovered part of the lost territory with the opening of the North American market. In reality, it is nothing more than a mere technical correction after the impressive rally of the previous day that led the American indices to surpass the pre-crisis highs.
The market optimism is evident. It is motivated by the reopening of economic activity in most affected countries, even though in some of them, the contagion figures cannot yet be considered as out of danger.
The near future
Tomorrow, the Federal Reserve meeting is undoubtedly the most crucial element to take into account for the evolution of the markets soon. At the moment, American bonds are being bought, thus taking yields to lower levels, after the sharp falls of the last few days due to investors' greater risk appetite.
We are in a market situation in which the evolution of the stock markets is what sets the pattern of behavior for the rest of the assets. This is not always the case, but in this scenario, the price of the Dollar depends on how the indices move.
In a bullish stock market, the Dollar weakens and vice versa. When all the pandemic effects will pass, we will be aware of the macroeconomic figures and monetary policy as market-movers of the foreign exchange market. At the moment, everything has to do with the feeling of risk and is in the stocks where it is first reflected.
The most general market consensus is that the Federal Reserve maintains the stimulus; it is unlikely to increase it, given the extraordinary evolution of stocks. The market will listen to Powell's words to determine the Fed's level of determination to maintain this expansionary policy over time and its willingness to increase if necessary.
Any suggestion about the end of these measures or their reduction would be interpreted as negative by the market with the consequent damage in the stock markets and strengthening of the Dollar, but this seems unlikely, according to experts.
In a more normalized market in which investors are more inclined towards risk, the Dollar would tend to weaken.
In this sense, EUR/USD has a high probability of resuming its bullish path. This movement can be reinforced soon when the rescue fund is approved by the European Commission, an issue in which progress can be made during this month. At the moment, it has an intermediate resistance around 1.1380 above which could be on its way towards 1.1500.
OIL continued correcting to the downside today after reaching its bullish targets near $41.
Technically, it is overbought and has higher correction probabilities that could push it down to $35. The inventory data that will be published will give us a better view of the market demand situation and will be the main market-movers of this asset.