The single European currency tried hard to fall further yesterday, and it even worked out pretty well for it. But the coronavirus ruined everything. There was only hope that the peak of the spread of the epidemic had passed in the United States and the sad dynamics of the growth in the number of infected ones had stabilized, as terrifying news had come. A new anti-record was set in the United States yesterday, and the number of confirmed cases of coronavirus infection increased by 26.4 thousand. After such reports, the euro quickly returned to the values from which it started yesterday's trading day.
At the same time, the euro stubbornly ignored the actual European data. But preliminary data on inflation showed its decrease from 1.2% to 0.7%, which, of course, seriously increases the likelihood that the European Central Bank will nevertheless lower the refinancing rate to negative values. However, before the release of data, there were strong fears that the slowdown in inflation would be more significant. So albeit with a stretch, but we can say that in the end the data turned out to be even better than expected. But the single European currency went down. The fact of a serious decline in inflation is an extremely negative factor.
Inflation (Europe):
At the same time, we can not say that the US data were weak. On the contrary, S&P/CaseShiller data showed an acceleration in real estate price growth from 2.8% to 3.1%. However, we expected an acceleration to 3.2%. And the starting point should have been 2.9%. So the growth rate was slightly less than the forecast, and the previous data was revised for the worse. But still, we are talking about acceleration, not deceleration. In other words, macroeconomic statistics were negative in Europe and positive in the United States. But the rapid spread of the coronavirus across the United States has confused all maps.
S&P/CaseShiller home price index (United States):
If the dollar can blame the coronavirus for its failure yesterday, then today it needs to rely on it. As strange as it sounds. The unemployment rate in Europe will be released, which should remain unchanged. This strongly contrasts with the indirect data on the labor market that comes from the United States. There is no longer any doubt that there will be a serious spike in unemployment in the United States, triggered largely by the coronavirus epidemic. But it turns out that the European labor market is still holding up and clearly looks better than the American one. It is clear that this is an extremely positive signal for the single European currency.
Unemployment rate (Europe):
But the United States is expected to provide new and appalling information about the state of the labor market. ADP data should show a reduction in employment by as much as 170,000. This should be the first decline in employment since 2017. Employment decreased by 39,000 back then in September. But this was a local and temporary phenomenon. It is now clear that the situation can only get worse. And the scale of the reduction in employment is impressive. So yes, the dollar can only hope for news about the coronavirus. For example, reports that the peak of the epidemic in the United States has passed. Or something like that.
Employment change from ADP (United States):
From the point of view of technical analysis, we see an attempt of downward development, during which a local movement was formed towards the 1.0926 mark, but after that there was a reverse move, consolidating the quote above the psychological level of 1.1000. In fact, the currency pair continued to focus on the same levels as days earlier, signaling a variable sideways move.
In terms of the overall review of the trading chart, we see a rapid upward move from last week, where a path of more than 450 points was passed. The existing oscillation does not break the structure of the course, thus the upward movement can still be considered as a prospect for further development.
We can assume a temporary fluctuation in the range of 1.1000/1.1040, where a breakout of the upper boundary and a move towards the 1.1080 level is not excluded. The main movement is considered after consolidating the price above 1.1095.
We will concretize all of the above into trading signals:
- We consider long positions in the form of basic transactions if the price is consolidated higher than 1.1040, in the direction of 1.1080. The second move is made from 1.1095, towards 1.1145.
- We consider short positions as alternative transactions if the price is consolidated below 1.0990, towards 1.0950.
From the point of view of a comprehensive indicator analysis, we see a versatile signal issued by technical instruments, which arose due to a slowdown in terms of lateral movement. The indicators will be aligned in the case of price taking relative to the coordinates of 1.0950/1.1080.
