Market Watch review. 18.11.2020

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

• UBS notes the prospect of USD weakening.
• Rising inflation in Britain.
• US stock indices at risk.

Let me remind you that earlier I already noted the statements of analysts from Morgan Stanley, who recommended getting rid of USD and paying attention to the stock market. Now UBS is talking about the prospect of further weakening of the American currency. Experts from these banks agree that the negative effect of the pandemic will decrease as early as 2021, while US incentives will continue to increase. As a consequence, the stock market may continue to rise, thereby putting pressure on the US dollar.

Also, UBS notes the general growth potential of risky currencies, including against the background of the fact that the rapidly increasing US government debt reduces the attractiveness of the USD as a safe-haven currency. Accordingly, analysts expect the EUR / USD currency pair to rise to the 1.20-1.25 area in 2021. But this scenario is possible only if the quarantine restrictions in Europe are quickly and sufficiently reduced.

Now let's move on to the published UK inflation report. The actual data turned out to be better than the forecast, moreover, the annual indicator exceeded both the previous and the forecasted value. But the activity of buyers of the GBP / USD currency pair remains moderate, thereby indicating a shift in focus from macroeconomic indicators to progress in the development of a vaccine.

Moving to the US trading session, I would like to note the comments of the head of one of the asset management companies, James MacDonald. During an interview with CNBC, he said that the main US stock index S&P500 is on the verge of a collapse of 20% or 700-800 points. Pay attention to the price chart of this index - on the daily time frame, you can clearly see a formed pattern that looks like the letter W. According to James, this indicates the weakness of buyers and, as a result, increases the risk of a collapse of the index quotes.

If we see a collapse in US stock indices in the next few days or weeks, the demand for the US dollar will sharply increase. Accordingly, all traders who hold short positions in the US currency should take this into account. The development of events in this scenario may occur in the event of significant problems with the vaccine or a decrease in the amount of financial assistance in the United States.

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