01.09.202009:46 Forex Analysis & Reviews: Trading plan for EUR/USD and GBP/USD for 09/01/2020

Let me briefly remind you what is the key main point of Jerome Powell's speech last week: The head of the Federal Reserve System announced that a rise in interest rates should not be expected in the near future. This seriously disappointed market participants, especially against the backdrop of European Central Bank's hints that it is time to stop practicing techniques in the form of zero interest rates. They say they are more likely to harm the economy than improve it. So, apparently, the Fed did not think this was enough and it decided to make investors more frustrated. On the other hand, Richard Clarida, announced yesterday that if necessary, the Federal Reserve could return to considering the possibility of lowering interest rates to negative values. In general, a start was given to the dollar's massive sales. It is noteworthy that the greatest activity was observed several hours after his speech, which is during the Asian session. It was as if the Japanese, who have been living in conditions of negative interest rates for almost ten years, were shouting at the top of their voices that this is definitely not worth doing. In general, the situation is not very pleasant for the dollar.

At the same time, the single European currency really had enough reasons for growth, but they were simply ignored. So, preliminary data on inflation were published in several European countries, which turned out to be much better than forecasts. In particular, the rate of decline in consumer prices in Spain is expected to rise from -0.6% to -0.8%, but it turned out that they slowed down to -0.5%. More importantly, Germany, where the rate of decline in consumer prices should have remained unchanged, suddenly stopped - that is, the -0.1% decline was replaced by 0.0%. However, the situation is slightly worse in Italy, as the rate of decline in consumer prices rose from -0.4% to -0.5%, although it should have remained unchanged. But in any case, the situation with inflation looks clearly better than expected, which means that it is too early to talk about Europe slipping into full-fledged deflation, even if the economic recession in Italy accelerated from -5.5% to -12.8%, and not to -12.4%, as the preliminary estimate showed.

Inflation (Germany):

Although the Fed gave the dollar a noticeable impulse yesterday, the further growth of the pound and euro should be supported by something else. For the pound, data on the credit market can play the role. In particular, the volume of consumer lending should grow by 0.6 billion pounds. On the other hand, the volume of mortgage lending may well grow by 2.5 billion pounds, while the number of approved mortgage loans may reach 51.0 thousand, which is quite good at present.

Number of approved mortgages (UK):

The main event of the day will be the publication of preliminary data on inflation in the entire euro area. At the moment, it is forecasted to decline from 0.4% to 0.0%, that is, it will literally fall into deflation, which can clearly please a few people. However, yesterday's data indicate that the result may be slightly better and inflation will slow down to about 0.2%, which is still a decline. Moreover, investors are much more afraid of the prospect of lower interest rates in the United States than the lack of consumer price growth in Europe. But there is nothing to be happy about the Eurocurrency, since the unemployment rate is expected to rise from 7.8% to 8.0%.

Inflation (Europe):

The EUR/USD pair, showing an increased upward interest, managed to approach the psychological level of 1.2000, where there was a slowdown on a systematic basis. We can assume that if there is no clear fixation of the price above the psychological level of 1.2000, we will expect a pullback in the direction of the values 1.1950-1.1900. The buy signal will be the price consolidating at 1.2015/1.2030.

The GBP/USD pair has been on an upward trend for a week, where market participants have already renewed their annual high. Thus, we can assume a temporary pullback towards 1.3350/1.3370, which will give a chance to regroup trading forces. The next round of long positions, in turn, awaits us after the price consolidates above 1.3420.