BUZZ-COMMENT-Curbing Europe's second coronavirus wave key for EUR/USD

Credit: REUTERS/DADO RUVIC

Fundamentals, yields and positioning are the major drivers of currencies, and though the market is long EUR/USD, fundamentals appear set to lead the next move as Europe fights to contain a COVID-19 resurgence heading into winter.

Oct 15 (Reuters) - Fundamentals, yields and positioning are the major drivers of currencies, and though the market is long EUR/USD, fundamentals appear set to lead the next move as Europe fights to contain a COVID-19 resurgence heading into winter .

With EUR/USD stalled around the midpoint of its September range, success in controlling the outbreak is likely to be the major factor for the euro zone economy and hence EUR/USD in the coming weeks, unless there is a shock result in the November U.S. presidential election.

Spain , Portugal , France and Germany are among countries working on, or implementing, measures to curb a second coronavirus wave. The economic impact of these restrictions will be the major factor for governments and European Central Bank policy, forecasts, and thus the EUR/USD.

Morgan Stanley's Oct 12 FX Positioning tracker showed that USD shorts and EUR longs increased at mildly oversold and overbought levels respectively. EUR/USD is off only 0.6% this week, so positioning is a modestly negative factor.

Charts show daily momentum studies, 5, 10 and 21 daily moving averages only a touch negative, as the pair consolidates in a broad 1.1600-1.2000 range since its near-13% gain from the March 1.0636 base to the September peak. Technically there is little short-term bias.

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(Andrew Spencer is a Reuters market analyst. The views expressed are his own)

((Andrew.m.spencer@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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