06.11.201909:08 Forex Analysis & Reviews: EURUSD: US services and business activity are in order. Rumors of successful US-China trade negotiations and cancellation of duties support many markets

Good indicators on the growth of activity in the US services sector helped the dollar to strengthen its position against the euro and the pound. Talk that the US and China are close to lifting trade duties and signing the first stage of a trade agreement is also encouraging traders and helping the US dollar. However, in the short term, an upward correction in EURUSD and GBPUSD will not be possible shortly.

The US foreign trade deficit in September was higher than economists' forecasts, which continues to indicate a decline in trade activity due to disagreements and tough protectionist policies of the White House administration. The sharp decline in imports was offset by a drop in the export component.

According to the report of the US Department of Commerce, the deficit in trade in goods and services in September 2019 decreased by 4.7% and amounted to 52.45 billion US dollars, while economists had expected the deficit to be 52.2 billion US dollars. The report indicated that imports fell by 1.7% compared to the previous month, to 258.44 billion dollars, while exports fell by 0.9%, to 205.99 billion dollars. The drop in imports was seen in sectors that are directly linked to domestic demand, indicating a slowdown in the overall global economy as well as economies abroad.

As noted above, the service sector in the US is showing quite good activity, continuing to grow at a faster pace. According to the Institute for Supply Management (ISM), the purchasing managers' index (PMI) of the US non-manufacturing sector in October of this year rose to 54.7 points against 52.6 points in September. Economists had expected the index to be 53.5 points. Let me remind you that values above 50 indicate an increase in the activity.

A report from the statistics Agency IHS Markit on business activity in the US in October this year was less rosy. According to the data, the final purchasing managers' index (PMI) for the services sector in October 2019 was 50.6 points against 50.9 points in September. Experts fear that a slight slowdown in the index could affect the data on the number of jobs closer to the end of the year.

However, according to yesterday's report, there are no problems with the number of vacant jobs in the United States. The US Department of Labor noted that the number of open vacancies at the end of September 2019 amounted to 7.02 million. It should be noted that the number of vacancies continues to exceed the number of unemployed Americans by 1.26 million.

US retail sales data also partially supported the US dollar yesterday afternoon. According to the report of The Retail Economist and Goldman Sachs, the US retail sales index for the week from October 27 to November 2 increased by 1.2%, and by 1.6% compared to the same period last year. According to Redbook, US retail sales also increased by 0.3% in the first 4 weeks of October. Over the week from October 27 to November 2 year on year, sales rose immediately by 5.5%.

This week, speeches by representatives of the Federal Reserve System continue, which will help to draw up the overall picture and views of the committee for the future. For example, yesterday the president of the Federal Reserve Bank of Richmond, Thomas Barkin, said that uncertainty about the economic and political situation could limit the monetary policy of the Central Bank. In his opinion, the Fed should carefully monitor whether the recent actions of the Fed have had the desired effect since the risks for the economy are shifted downward. However, Barkin believes that even despite the current situation with interest rates, the slowdown in global economic growth and the US trade war with China, the US economy is healthy and the risk of recession is very small.

As for the current technical picture of the EURUSD pair, further weakening of the European currency is questionable. Most likely, sellers will take a short pause until clarity in the negotiations between the US and China, and a small upward correction of the trading instrument will allow opening short positions at more favorable prices. The nearest resistance levels are seen around 1.1105 and 1.1150. As for the downward movement, it will be limited to the intermediate support level of 1.1050, but a larger range is seen around 1.0995 and 1.0940.