The coronavirus is back in the spotlight and is causing panic in the market after a new mutation, likely resistant to all vaccines, was announced today. Investors fear that this will lead to new restrictions on movement, lockdowns, with the need to develop new vaccines and carry out revaccination. The Australian dollar, being a key risky asset, experienced a wave of sales and outflow of investments today, despite the excellent October retail sales report, which exceeded forecasts twice.
Although the euro is not a safe asset, and the perspective of an exacerbation of the pandemic are also very negative for this currency, it managed to significantly improve its position in the confrontation with the AUD. At the same time, it should be noted that today's upward movement cannot be called accidental: if you look at the H4 chart, the trend reversal in favor of the euro can be easily detected, and it started in early November. During the month, the euro received support due to expectations of tightening of the ECB's monetary policy amid high inflation due to rising oil and gas prices. The euro also received support after the publication of business activity indices, which all turned out to be higher than the forecasts, and the auxiliary factor was the news about the formation of a coalition in Germany, in accordance with expectations.
Next week will be a key one for the EUR/AUD pair. The most important macroeconomic reports are expected, such as the business activity index in China, the GDP and trade balance in Australia, the Consumer Price Index in the EU and the unemployment report in Germany. So, volatility will increase next week. Most of the technical analysis tools indicate the effectiveness of the deals to BUY, and we, taking into account all the signs of a trend reversal, are opening the deals in favour of the EUR today.
