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Dollar may remain bid on oil price crash

  • EUR/USD fell in Asia as markets sold risk. 
  • Markets focus on the negative effect of Monday’s oil price crash.
  • Dollar is likely to extend gains on risk-off mood. 

EUR/USD suffered losses in Asia and could continue to lose ground in Europe, as uncertainty triggered by Monday’s oil price crash is likely to keep the US dollar better bid. 

The pair fell from 1.0870 to 1.0825 during the Asian trading hours as the American dollar gained ground across the board, especially against growth-linked antipodean currencies. The dollar index, which tracks the value of the greenback against majors, rose 0.20% to levels above 100.00, while AUD/USD and NZD/USD fell by over 0.5%. 

Investors put a bid under the US dollar, a global reserve, as Monday’s oil price drop into the negative territory highlighted the extent of economic damage caused by the coronavirus outbreak. While lower oil prices could boost real incomes and support consumer spending, markets are currently worried about its negative effects – the damage it would cause to the US shale industry and other oil producers and the resulting job losses. 

With markets currently focused on the negative impact of the oil price drop, the dollar will likely continue to gain ground during the day ahead, more so, as the S&P 500 futures are now reporting a 0.65% drop. Additional bearish pressure may emanate from President Trump’s decision to suspend immigration to the US to contain the coronavirus outbreak. 

Meanwhile, the great divide between the southern and northern Eurozone nations on coronavirus bond (community debt) will likely keep the EUR bulls on the sidelines. 

On the data front, Germany’s Zew Survey is scheduled for release at 09:00 GMT and could influence the single currency. The data calendar across the pond is light with Existing Home Sales due for release at 14:00 GMT. 

Technical levels

 

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