The euro-dollar pair is stuck in a flat. Although the mood for the pair is clearly bearish, the results of the last two days have made it clear that the bears are not able to gain a foothold below the 1.0850 mark. Sellers have fallen for this price target several times, but failed to stay there – and even more so to indicate new price horizons. However, the situation is even worse for EUR/USD bulls – they can only repel bearish attacks, but they are also unable to regain lost positions. Rather contradictory fundamental background does not allow the parties to attract the majority to their side, so that they can finally determine the vector of movement of EUR/USD. It is likely that tomorrow's data from China will change the situation – because we will learn about the growth of the Chinese economy for the first quarter, as well as the volume of industrial production in the country. These figures should either cheer the market or strengthen anti-risk sentiment.
Of course, traders are prepared for the fact that the Chinese economy went deep into the negative in the first quarter – after all, China took the first blow of the epidemic. According to preliminary forecasts, the volume of real GDP (from the beginning of the year to the reporting quarter) will reach the level of -4.5% (this indicator came out at 6.1% in the fourth quarter of 2019). If the real numbers match the forecast (not to mention higher values), the market will again awaken risk appetite. But if China closes the first quarter with more significant losses, dollar bulls will once again remind themselves – including in the EUR/USD pair.
The indicator of industrial production in China will also be published tomorrow. Industrial production fell by 13.5% in February – the worst result in the last 30 years. The March indicator should also come out in a negative area, but still better than the February values. According to preliminary forecasts, the indicator will be at -7.1%. Again, if it is at the forecast level or higher, it will indirectly help the euro to adjust, otherwise investors will get another reason to purchase a key protective asset – the dollar.
It is noteworthy that US macroeconomic statistics affect the greenback's position in a special way. If earlier, in the pre-crisis times, the currency, as a rule, reacted negatively to the decline in indicators of the US economy, now it is the opposite – the worse the situation in the US, the more actively investors invest in the dollar. Overly negative figures suggest that the overall decline in the global economy could be more widespread, and the awareness of this fact provokes an increase in anti-risk sentiment (thereby increasing the demand for the dollar).
Following this logic, the US currency suspended its growth today after the release of relatively good data on the US labor market. However, it is not quite correct to talk about "good" results here – they just turned out to be somewhat better than pessimistic expectations. Let me remind you that the increase in the number of applications for unemployment benefits has been growing at a tremendous pace for several weeks in a row. This figure jumped to three million on March 26, almost seven million the week before last, and was at the level of 6.6 million last week. This indicator was also expected to exceed the 6-million mark today. But it did not: it came out at 5.2 million. And although this result is not a reason for optimism, dollar bulls still retreated – especially against the background of the White House's intentions to "open the economy" in early May.
However, the bulls of the EUR/USD pair also could not take advantage of the situation, because another macroeconomic indicator - the Philadelphia Fed index of manufacturing activity - fell to a 40-year low (-56.6 points) today. All components of the latest release were in the negative area, and the component of new orders fell by more than 100 points. The number of construction projects launched in the United States also significantly fell in March - the highest over the past 36 years. This indicator is an important leading indicator of the health of the real estate market (and the economy as a whole), so today's result has again alarmed investors.
In turn, the European currency received little support from the ECB: Christine Lagarde announced today that the regulator will consider additional "options and opportunities" to support the economy in the context of the growing crisis. But the euro's reaction was minimal - firstly, no specifics, and secondly, another reminder of the "growing crisis."
Thus, both bulls and EUR/USD bears are waiting for an information impulse that will either help sellers gain a foothold below 1.0850 and go to the bottom of the eighth figure, or will allow buyers to gain a foothold above 1.0910 (the middle line of the Bollinger Bands indicator is D1), determining the next growth target at 1.0980 (Kijun-sen line on the same timeframe). While the pair has not overcome the above price targets, there is no need to rush with trading decisions, especially on the eve of important data from China.
The material has been provided by InstaForex Company - www.instaforex.com