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As expected, under the pressure of macroeconomic statistics, the dollar lost its position yesterday. At the same time, preliminary data on the GDP of the United States for the first quarter were even worse than forecasts. Although the economy was expected to decline by as much as 4.6%. But in fact, it turned out that the economy contracted by 4.8%. This is despite the fact that restrictive measures designed to contain the spread of the coronavirus epidemic were introduced only in mid-March, that is, at the very end of the quarter. So the economic downturn in the second quarter will be even bigger. And it is clear that such a development of events seriously frightened market participants, which made it possible for the euro to somewhat strengthen its position. At the same time, it was also quite predictable that the Federal Open Market Committee meeting was ignored. After all, the Federal Reserve left everything as it is. Two emergency cuts in the refinancing rate, according to Fed Chairman Jerome Powell, are currently sufficient to stimulate the economy, even if not right now, but to restore the economy after the epidemic. So at this point in time, the regulator will not do anything.
Europe is set to report on GDP today. The economic downturn in the eurozone may not be as deep as in the United States. A decline of only 3.0% is expected. It slightly looks better compared to the United States. But besides this, preliminary data on inflation will be published in Europe, which should show its deceleration from 0.7% to 0.0%. In this regard, today's meeting of the Board of the European Central Bank may be much more interesting than yesterday's FOMC meeting. After all, if the threat of deflation is becoming more and more real, then the ECB could seriously think about the possibility of reducing the refinancing rate to negative values. Or come up with other incentive measures. For example, expanding the quantitative easing program. It is clear that today they will not do anything regarding this, but even hints of such a development of events will suffice the market. And of course, one should not forget about unemployment, the level of which should increase from 7.3% to 7.9%. So in the end, only GDP data looks better than in the United States. Everything else indicates rather a weakening of the single European currency.
Inflation (Europe):
Regular data on applications for unemployment benefits will be published in the United States, which should once again show that the situation on the labor market continues to deteriorate. The number of initial applications should decrease to 3,680 thousand. This is still insanely large, since approximately 200 thousand initial calls per week are normal. In addition, the number of initial applications amounted to almost 26.5 million over the previous five weeks. And in theory, after such unemployment there is simply nowhere to grow. But no, the number of initial appeals is still incredibly high. But worst of all, the number of repeat applications should set another record. They could turn out to be approximately 18.9 million. The US is facing a situation where people continue to lose their jobs and cannot find a new one. This is probably the best illustration of the economic collapse that is taking place in the American economy.
Repeated Unemployment Insurance Claims (United States):
From the point of view of technical analysis, we see that the boundaries of fluctuations of 1.0815/1.0885 are still relevant, where the quote is periodically concentrated at a mirror level of 1.0850, which serves in the range as an average value of 50% deviation. In fact, the oscillation has a weight of more than 50 hours, which means that the stability of the structure is on the verge, which may soon lead to changes.
In terms of a general review of the trading chart, the daily period, a sequential downward movement is visible, where the nearest variable support is in the region of 1.0727.
It can be assumed that price fluctuations within the specified limits of 1.0815 // 1.0850 // 1.0885 will still remain in the market, where the best tactic is to work on the breakout of established boundaries.
We specify all of the above into trading signals:
- We consider purchase positions higher than 1.0895, towards 1.0920-1.0950.
- We consider selling positions lower than 1.0840, towards 1.0815.
Deals for a breakout of the range are considered after consolidating the price below 1.0810.
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