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Yesterday's focus was on the UK labor market data, where the indicators were not disappointing at all. The unemployment rate declined from 5.1% to 5.0%, against the expected growth of 5.2%. However, the pound did not make any reaction on the positive dynamics of the labor market. We can assume that investors were scared about the discrepancy between the unemployment rate and the decline in employment, where UK employment declined by 147 thousand according to the January data.
In the afternoon, there was a publication of new home sales data in the US. This February data declined by 18.2%, against the forecasted 6.5%.
The US dollar hardly reacted to the negative statistics, which was unusual. Nevertheless, it is possible that the information flow regarding hot topics affected the market – the extension of restrictive measures in Europe and the UK, vaccine embargo, and EU sanctions against China with a quick response from the defendant.
Judging the dynamics of the US dollar on the DXY index chart, it is already evident that there is an upturn, which indicates the dollar's desire to grow. The seven-day stagnation in the range of 91.40/92.00 served as a cumulative process. As a result, it was likely to regroup trading forces and break through the upper limit of the stagnation from 92.00 yesterday.
At present, the index is moving towards the direction of the local high (92.50) of March 9. This should be carefully monitored, as the breakdown of which will act as a strong impulse for the further growth of the US dollar.
As for our traditional currency pairs, we have a rapid decline in both the euro/dollar and the pound/dollar.
Analyzing the trading chart of the EUR/USD pair, a number of technical points should be emphasized. Here, the area of the psychological level 1.2000 (1.1950/1.2000/1.2050) acts as a resistance in the market, where the lower border of resistance (1.1950) served as sellers' entry point. We already expected the volume of short positions (sell positions) to rise, and so, we took selling positions for euros. The prospect for a decline was directed towards the local low (1.1835) of March 9, where the quote eventually came.
Yesterday's trading recommendation could provide an income of about 50 points, which is $ 50 with a trade volume of 1 instalot.
Meanwhile, the GBP/USD pair showed an even greater downward interest compared to its European counterpart. Market participants were able to update the local low of the correction from the high of the mid-term trend 1.4224 ---> 1.3778, eventually breaking through the support level of 1.3750.
Based on our trading recommendation on March 23, a downward movement was expected. Therefore, we laid down sell positions towards the support level of 1.3750.
Today, the United Kingdom already published its inflation data. Market participants saw its level decline from 0.7% to 0.4%, instead of growth.
The pound took a pause during the time this statistics was released, which is likely because of investors' high level of uncertainty.
Along with the inflation data, there was also a publication of producer prices indicators (PPI) for February, where growth by 0.9% was recorded. However, market participants ignored it.
The flow of statistical data is not yet done, since they will begin to publish the PMI indicator in Europe, UK and the US from 9:00 Universal Time, where the index is forecasted to rise almost everywhere.
[All time stamps are in Universal time]
Looking at the EUR/USD pair trading chart, it can be seen that the quote stopped for a while within the support level of 1.1835, forming a stagnation through local consolidation. If the price holds below the 1.1830 level, sellers will have a chance to prolong the previously set correction move, and the euro will be under attack heading towards 1.1700-1.1650.
Traders will consider an alternative scenario of the market development if the price rebounds from the pivot point of 1.1835, but this is unlikely due to the current downward mood.
As for the GBP/USD pair trading chart, it shows that market participants have already managed to keep the quote below the support level of 1.3750, which opened the way towards 1.3700. Considering the high interest in short positions, we cannot rule out the pound's decline towards 1.3650. However, it should also be noted that short positions are already overheated, so fixing of trading volumes may occur, which will lead to a short-term pullback-stagnation.
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