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A sharp jump in the cost of oil sharply weakened the dollar. However, the rebound in oil prices that started yesterday morning, strangely enough, could not stop the euro's growth. Surprisingly, it stopped almost as soon as the data on construction in Europe was published. And this is quite strange, since after that the market simply ignored similar data in the United States. So the market continues to behave not quite adequately. One moment it reacts to what is happening, the next it does not. This means that market participants have no idea what to do or what to expect.
The growth of the single European currency stopped after it became known that the volume of construction in Europe fell by 15,%. This is slightly less than it was in 2012, and noticeably less than the decline in 1996. However, the data is for March. So in April, the recession may be even stronger and become a record. Moreover, it is necessary to pay attention to the fact that the previous strong decline in construction volumes does not correlate with any global financial crises. Now we are seeing a direct correspondence. And this suggests that the industry is in a very serious condition. Typically, the construction sector has a serious margin of safety, as it relates to a segment with a very long production cycle. And even if the economy is experiencing serious difficulties, construction must be completed. Moreover, financing was carried out long before the start of all kinds of economic shocks. The construction sector reacts to all this with a certain delay. This is due to the fact that the started projects are being completed, but there are no new ones. But this time, we see an instant reaction from the construction industry. Of course, we can say that this is due to quarantine measures. But the result is one that no one has ever encountered, and it is not clear what the consequences will be.
Construction volume (Europe):
However, the strange thing is that the market ignored the data for the United States. But the volume of construction of new homes decreased by 30.2%. And it turned out to be the sharpest one-time drop since the 1960s. In addition, the number of construction permits issued decreased by 20.8%. And given the fact that permits are issued first and construction starts only after that, we can safely say that the reduction in construction volumes is still far from being completed. So it's only going to get worse. But the market stood still. It's like no one knows where to run. After all, it is equally bad everywhere.
The volume of construction of new homes (United States):
The only thing that market participants can focus on today is the inflation data on Europe. And of course, it should show a decrease in inflation from 0.7% to 0.4%, which, in theory, should weaken the euro. But the fact is that the decline in inflation has already been taken into account at the time of publication of preliminary data. So it is quite possible that this data will be simply ignored. The only thing that can be said with relative certainty is that this will clearly not result in the euro's growth. Unless there are some loud and scandalous statements. From the White House for example.
Inflation (Europe):
From the point of view of technical analysis, we see an upward inertial movement from the range level of 1.0775, where accumulation was formed in the period earlier. The current move brought market participants to the psychological level of 1.1000, (1.0980 // 1.1000 // 1.1020), where there was pressure and, as a fact, a slowdown with trading forces concentrated within the 1.0950 mark.
In terms of a general review of the trading chart, the daily period, it is worth noting that the inertial movement did not affect the clock component of the market, which means that the downward trend still persists.
It can be assumed that no matter how strong the inertial fluctuation is, it cannot change the market sentiment. Thus, in the near future, the initial cycle may resume, but so far a variable oscillation is not excluded within the limits of 1.0915/1.0980.
We specify all of the above into trading signals:
- We consider the buy positions in two versions: the first, local move in the direction of the 1.1000 level, and in case we pass the previous day's high; The second option is based on the breakdown of the main level of 1.1000 and price taking higher than 1.1020, but we can go about changing the direction of the monthly cycle.
- We consider selling positions as major transactions lower than 1.0915, towards 1.0850-1.0775.
From the point of view of a comprehensive indicator analysis, we see that the indicators of technical instruments have local upward interest due to the inertial course of the price.
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