Euro outlook amid coronavirus
As expected, the coronavirus has begun to spread beyond China, encompassing ever larger territories and infecting ever more people.
A new hotspot has emerged in Europe, specifically Italy, where the number of infections is growing rapidly.
Unsuccessful attempts to isolate cities where the virus was detected have yielded little results, and reports of cases are already beginning to arrive from other European countries.
In Italy itself, store shelves are empty, schools and universities are being closed for quarantine, and mass events have been cancelled.
People are becoming less likely to leave their homes, use public transportation, and shop. In effect, the Chinese scenario is repeating itself.
This means that nothing good should be expected for the European currency, the Euro, which has already begun to fall against the US dollar:
This trend is expected to continue until the epidemic subsides or an effective treatment is found.
However, another scenario is likely: if the coronavirus spreads overseas and reaches the United States, panic on the stock exchanges and an economic downturn will cause the US dollar to weaken.
Therefore, when opening a short position on the EURUSD currency pair, one should be prepared to close the position upon receiving bad news from the US.
The most likely forecast is that the euro will fall to $1.06 per euro, with further developments depending on the situation in the US itself.
Overall, the market situation is quite complex; most investors are looking to sell, stock and energy prices are falling, and only pharmaceutical stocks, and even then, not all, are likely to rise.
