Market Watch review. 26.10.2020

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

• More than 50 thousand new COVID-19 cases in France. 
• Collapse of oil prices.
• Tensions between the US and China are on the rise. 
• Increased demand for protective assets. 

There is less and less optimism and this is very clearly seen in the change in risk appetite. France records more than 52,000 officially confirmed COVID-19 cases every day, while the head of the scientific council of France notes that there is approximately the same number of infected people who are not included in the official statistics. Also in the United States, the last two days have seen a record number of new cases of COVID-19. Italy has announced a partial lockdown, and Spain has introduced a national curfew.

On Friday, we saw a fairly active wave of sales in the black gold market. On the last trading day of last week, sellers failed to overcome the technical support level at $39.5 per barrel, but by the middle of the European trading session, US WTI crude oil fell below $38.5, negatively reacting to the rapid increase in new COVID-19 cases in the US and Europe.

The number of cases in most countries of the world is significantly higher than in April and March, when there was a total quarantine in the United States and Europe, but now countries are in no hurry to take such drastic measures. However, the risk of oil prices returning to $36 per barrel remains very high. In addition, Libya intends to almost double its oil production, putting additional pressure on oil quotations.

And now let's move on to the equally important news, which, along with the pandemic and the upcoming presidential elections in the United States, has faded into the background. I’m talking about the trade and technological confrontation between the United States and China. Let me remind you that since September of this year, the largest American companies, such as Apple, Google and a number of others, have begun to withdraw their own production from China. All this leads to a global split and can result in quite strong shocks in the financial markets. 

As the risks associated with the coronavirus pandemic and the deterioration of relations between the US and China increase, the demand for risky assets continues to increase. So the USD, which serves as a protective asset, resumed growth in a pair with most currencies. For example, the EUR/USD currency pair came close to 1.1800 during the European session, losing more than 40 points.

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