The market is frozen in indecision and does not know where to move. This is despite the fact that almost all published macroeconomic data clearly point to the strengthening of the Dollar. The standstill can still be explained by the preliminary data on business activity indices in Europe. Although they came out better than forecasts, they still showed a decline. In particular, the index of business activity in the service sector decreased from 46.4 to 45.0, and, according to forecasts, should have decreased to 44.3. The index of business activity in the manufacturing sector was also expected to decline from 55.2 to 54.5, but it decreased only to 54.7. As a result, the composite PMI fell from 49.1 to 47.5 and not the expected 47.2. Though we are still talking about a decline in the indices, the situation was not as negative as everyone expected, which could be the reason for the stability of the Euro.
The composite index of business activity (Europe):
But the fact that the market did not explode after the publication of similar data for the United States clearly indicates that investors simply do not understand what to do and what to expect in the future. Usually, if the indices are expected to decline but are growing instead, the market meets such news with confident optimism. But not this time. The index of business activity in the service sector, which was supposed to fall from 54.8 to 54.3, rose to 57.8. The index of business activity in the manufacturing sector rose to 59.1 instead of declining from 57.1 to 56.0. As a result, the composite PMI increased from 55.3 to 58.0. The only thing that can somehow justify such market behavior is the investors' reaction to the announced plans of the new president of the United States. We are talking about plans to support the economy, which are more like banal populism and senseless distribution of money. A number of influential economists have already expressed their concern that the plan to support the population and business will not only be extremely expensive, but also completely useless. This means that it is more likely to cause damage to the American economy. Such statements were already enough to make investors wary of the decision. Given that today the macroeconomic calendar is completely empty, investors still have time to think.
The composite index of business activity (United States):
By the end of last week, the currency pair went into a stage of stagnation after increasing the volume of long positions on the Euro. The limits of the amplitude fluctuation are 1.2150/1.2190, which has a slight deviation from the range of 1.2130/1.2170. This range played the role of interaction of trading forces previously.
The market dynamics were almost twice as low as the average level and the speculative hype had no obvious manifestations.
If we proceed from the current location of the quote, then the amplitude fluctuation within the specified limits is preserved in the market which may lead to a cumulative process.
Considering the trading chart in general terms, it is worth highlighting the medium-term upward trend in the daily period. This is the structure the quote moves in.
It can be assumed that the current range of 1.2150/1.2190 will serve as a catalyst for speculative interest where the main activity will be on the breakdown of one of the borders.
Based on the set boundaries, you can trade with these recommendations:
- Long positions are considered in the case of holding the price higher than 1.2190 with the prospect of a move to 1.2220-1.2250.
- Short positions are considered in the case of fixing the price below 1.2150 with the possibility of moving to 1.2130-1.2100.
From the point of view of a comprehensive indicator analysis, we see that the indicators of technical instruments signal a purchase relative to the minute and hour periods. This is due to the upward movement in the past week.
