The market is recovering from Friday's fluctuations

· A new Omicron virus strain has been discovered that may be resistant to vaccines.

· The yen, franc, euro and US bonds acted as defensive assets.

By the end of the week, major currencies closed in different directions. The largest decline was shown by the New Zealand dollar (-1.03%), the Australian dollar (-1.41%), the Canadian dollar (-0.76%), and the British pound (-0.78%). The growth was shown by the single currency (-1.42%), the Swiss franc (-0.98%), the Japanese yen (-0.41%).

On Friday, November 26, trading in the euro closed with growth. The single currency has risen in price against the dollar by 0.97%, to 1.1318. The euro strengthened while the Canadian, New Zealander and Australian declined. The backdrop for the collapse of many currencies, cryptocurrencies, oil and stock indices was the report of a new strain of coronavirus (B.1.1.529.), Which may be resistant to vaccines. Fears of a new blow to the global economy reduced the attractiveness of risky assets for investors.

You are probably wondering why the euro strengthened and the dollar weakened on the negative news about the coronavirus. The dollar is also a defensive asset.

The euro, like the yen, is a low-yielding currency. Due to low interest rates, funds for the carry trade were borrowed in it. Accordingly, the risk aversion triggered a buyback of the euro.

The dollar fell while the yield on 10-year US bonds fell. If the new variant of Covid-19 does begin to spread rapidly around the world, it will damage the global economic recovery. In this regard, the US dollar will become vulnerable as the Fed may delay raising rates. Because of Omicron, investors began to postpone the first rate hike from June to September.

ECB Vice President Luis de Guindos said Friday that despite concerns about the new strain of the Covid-19 virus, he thinks the economic impact will be less than in the past. De Guindos added that he believes the economic impact will not be comparable to the results achieved a year or two ago as the economy adjusted to the constraints.

Scheduled statistics (GMT +2):

At 11:30 the UK is to publish data on the number of approved mortgage applications in October. Also, a report on the volume of lending to individuals in October will be released.
At 15:30 in Canada, there will be a report with data on the balance of payments of the 3rd quarter, the index of prices for industrial goods for October.
At 17:00, the United States will present data on the change in the number of pending sales in the housing market in October.
At 19:15, the head of the ECB K. Lagarde will deliver a speech.
At 21:00, the head of the Bank of Canada, Tiff Maclem, will deliver a speech.
At 22:00 the head of the Federal Reserve Bank of New York John Williams will deliver a speech.
At 10:05 pm, Fed Chairman Jerome Powell will deliver a speech.

Current situation:

At trading in Asia, there is a recovery in risky assets. Assets affected by news of the new COVID-19 strain. The demand for risky assets rose after positive news from Israel. Professor Dror Mezorach, head of the coronavirus department at Hadassah Ein Karem University Hospital, said preliminary reports on the clinical condition of people infected with the new variant are encouraging.

The focus of attention of traders has shifted to the speeches of the heads of the Central Bank and representatives of the US Federal Reserve. Lagarde and Powell are performing tonight. If Fed Powell expresses serious concern about the new strain, then risky assets will come under pressure again. The week will be indicative of a greater understanding of the impact of the new corona strain on the markets.

Technical analysis:

On Friday, the euro rate rose to $ 1.1331. Growth stopped between 112-135 gr. Morning correction was 45 grams. The market situation remains uncertain as it takes time to analyze Omicron's new COVID-19 variant. The market will continue to pump in the coming days. The key event of the week will be Non-Farm Payrolls.

Summary: The euro closed higher on Friday amid risk aversion. The euro, like the yen, is a low-yielding currency. Due to low interest rates, funds for the carry trade were borrowed in it. Accordingly, the risk aversion triggered a buyback of the euro. The price dropped to 1.1272 on Monday. The market is correcting after sharp fluctuations on Friday. Increased volatility is expected at the American session after the speeches of K. Lagrade and J. Powell.