On Friday, market activity was low due to US Independence Day celebrations. On Thursday, the US recorded a record number of new coronavirus cases at more than 55,000.

Last week, trading on the majors closed up against the US dollar. The New Zealand dollar was the biggest winner at +1.75%, followed by the pound at 1.23%, the Australian dollar at 1.19%, the Canadain dollar at 1.01%, the Swiss franc at 0.4%, the euro at 0.24%, with the yen bringing up the rear at 0.27%.

On Friday the 3rd of July, US markets were closed for US Independence Day celebrations (4th of July). Because of this, market activity was much lower than usual. The EURUSD pair traded within a range of 1.1218 - 1.1250. The GBPUSD pair is trading within a range of 1.2438 - 1.2490. The USDJPY pair has stabilised around 107.50. European stock indices have dropped by about half a percentage point.

The number of new COVID-19 cases recorded in the US on Thursday was more than 55,000. Over the weekend, this figure dropped to 46,000, but is still very high. The number of global cases has surpassed 11.5 million, with the number of covid-related deaths standing at around 536,000. Investors are fearful over the rise in cases across certain regions of Europe.

Day’s news (GMT+3):

• 11:30 UK: Markit construction PMI (Jun).
• 11:30 Eurozone: Sentix investor confidence (Jul).
• 12:00 Eurozone: retails sales (May).
• 16:45 US: Markit services PMI (Jun).
• 17:00 US: ISM non-manufacturing PMI (Jun).

Current situation:

On Monday the 6th of July, trading on the US dollar index opened down. This was caused by a 3% rise on Chinese stocks. S&P 500 futures rose by 0.9%. In the Asian session, the US dollar index (DXY) shed 0.16% to reach 97 points. It’s premature to draw any conclusions based on what’s happened in the Asian session, because US markets were closed on Friday. Trading will resume today, so we’ll see how sentiment towards risky assets has changed over the weekend.

The EURUSD pair has recovered from 1.1245 to 1.1292. The pair has reached the upper line of the corridor formed on the 25th of June. We’re not forecasting a breakout today. We expect the pair to rise to 1.1300 followed by a correction to the balance line at 1.1265 by the end of the day. If we don’t get a sharp drop, then it’s possible to open a long position at the LB line.

Remember that markets are still jittery over the rapid spread of the coronavirus, as well as increased tensions between the US and China. The US Senate has voted in favour of a bill that contains provisions for penalising banks that work with Chinese officials who helped make the new Hong Kong security law a reality.

Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, warned on Thursday that the virus may have mutated and become even more infectious. He also predicted that the number of new daily cases would soon surge to 100,000.

Traders are trying to balance their hope of economic recovery with fears of an increase in COVID-19 cases.