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It is clearly seen how market participants were waiting for the publication of the text of the minutes of the Federal Open Market Committee meeting, since all day quotes stood still. But as soon as the text of the minutes was published, the market came to life, and the value of the single European currency went down. Although the scale of the dollar strengthening is extremely small against the background of a static picture, it looks impressive. In many ways, a rather sluggish strengthening of the dollar is due to the fact that the text of the minutes of the Federal Open Market Committee meeting confirmed the assumptions of the majority of investors - despite the angry demands of Donald Trump to immediately reduce the refinancing rate by another 1.00%, the Federal Reserve does not intend to once again soften the parameters of monetary policy during the current year. Such conclusions were already suggested because the decision to reduce the refinancing rate from 2.50% to 2.25% was not unanimous. In other words, the Federal Reserve does not intend to rush headlong following the panic sentiment fueled by various media outlets regarding the trade conflict between the United States and China. Jerome Powell and his colleagues are inclined to pursue a cautious and balanced policy, based on economic realities, rather than rumors, speculations and assumptions. In many ways, this adds points to the dollar, so that we will continue to observe its sluggish strengthening.
Today, all market attention will be focused on the publication of preliminary data on business activity indices, first in Europe and then in the United States. The forecasts are, to put it mildly, disappointing. So, in Europe they expect a decline in absolutely all indicators. In particular, the index of business activity in the manufacturing sector should decrease from 46.5 to 46.2, and in the service sector from 53.2 to 53.0. As a result, the composite index of business activity should decrease from 51.5 to 51.2. Of particular concern is the index of business activity in the manufacturing sector, which continues to fall, although it is already at a value below 50.0 points, which is the boundary below which the risk zone for a recession begins. The worst thing is that this very index of business activity in the manufacturing sector has been declining since the end of 2017, practically without making any attempts to grow.
The dynamics of the business activity index of the euro area:
In the United States, the situation with business activity indices is only slightly better. In contrast to Europe, an increase in the index of business activity in the manufacturing sector is expected from 50.4 to 50.5. But this does not help the composite business activity index, and it should fall from 52.6 to 51.7. The reason is the index of business activity in the service sector, which may decline from 53.0 to 52.8. But in any case, the situation in the United States looks a little better. Much more importantly, the business activity index in the manufacturing sector of the United States is still above 50.0 points, which indicates albeit moderate, but still growth. Moreover, a fall in the number of applications for unemployment benefits by as much as 30 thousand is expected. Moreover, both the number of initial applications and repeated ones should decrease. In particular, the number of initial applications for unemployment benefits should decrease by 4 thousand, and repeated ones by 26 thousand.
The dynamics of the business activity index of the United States:
After an inertial move, the EUR/USD pair went into a three-day accumulation, focusing on the boundaries of 1.1066/1.1110. Considering everything that happens in general terms, we see that the current platform in the form of a flat formation is an excellent point for the regrouping of trading forces, while maintaining bearish interest in the market.
It is likely to assume that the fluctuation in the given frames of 1.1066/1.1110 still remains for some time, but now traders are at a low start, analyzing the behavior of quotes within the lower limit of accumulation. If the price nevertheless succeeds in consolidating below the control point of 1.1066, we will open the way towards the psychological level of 1.1000 (+/- 30 points).
Let's concretize all the above into trading signals:
• We consider long positions in two versions: the first, in case of deceleration within 1.1066, followed by a rebound, where the primary prospect is in the region of 1.1100; the second option, in case the price is consolidated above 1,1120.
• We consider short positions in case of price consolidation lower than 1.1066 (not a puncture), with the prospect of a move to 1.1000 (+/- 30 points).
From the point of view of a comprehensive indicator analysis, we see that indicators on all major time periods signal a further decline in quotations, which is justified in terms of general market interest. In the event of another deceleration within 1.1066, the first signal will come from indicators at shorter time intervals (15M, 30M, 1H).
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