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26.10.2020: Possible lockdown in Europe weighs on markets. Outlook for EUR/USD and GBP/USD.
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Despite the fact that today, the macroeconomic calendar is almost empty, the euro and the pound sterling are losing in value. Notably, the drop in both currencies is not connected with the trade negotiations between London and Brussels. There is no news on the issue.
In fact, the decline was caused by a rising possibility of the reintroduction of quarantine measures in the EU. Most European countries may impose such measures in the near future. Thus, Spain’s authorities are planning to extend the current restrictions, including a ban on movement between districts, by six months. During the weekend, the number of new virus cases in Spain exceeded one million. The same figures were provided by France. Italy and the UK may soon follow the steps of their neighbors. Thus, it is obvious that Europe will switch to tougher lockdown measures. Investors suppose that this may have a disastrous effect on business.
Nevertheless, the US will disclose some microeconomic reports today. Thus, the US new home sales may advance by 2.5%. However, this indicator is of minor importance. That is why it will hardly influence the market. Investors have nothing to do but to monitor actions of the EU governments.
The euro/dollar pair returned to the support level of 1.1810 after a short-lived hovering near the level of 1.1860. Thus, the downtrend is quite possible.
If the price consolidates below 1.1785 on the four-hour chart, it may drop to 1.1700 (*). Otherwise, the pair may rebound towards 1.1860.
The pound/dollar pair once again hit the psychological level of 1.3000. After that, it slowed down and rebounded. If the price fixes above 1.2990 on the four-hour chart, the pair is likely to trade above 1.3000 with the target at 1.3100.
However, the pair may also drop to 1.2960-1.2900.
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