The single European currency continues its slow but steady decline. Yesterday, it is even difficult to single out any specific news that would be the reason for its decline. The single European currency simply declined throughout the trading day. It was not even helped by the retail sales data, which, from a formal point of view, turned out to be just incredibly positive. The rate of decline by -2.2% in retail sales was replaced by an increase of as much as 0.6%. And this is despite the fact that they expected a slowdown in the rate of decline to only -0.2%. But instead of a decline, we had a growth. If we approach each macroeconomic indicator as something completely separate, then it is not at all clear why the single European currency did not grow. However, all indicators should be considered exclusively in conjunction with other parameters. Retail sales most often need to be correlated with inflation, the growth rate of which is noticeably higher. This means that after a long period of deflation, Europe is facing a situation of outpacing demand growth. In other words, the demand for goods and services is growing faster than their supply. Such a combination is dangerous because in Europe a spiral of uncontrolled inflation growth can unfold, which will force the European Central Bank to sharply change the course of its monetary policy, so instead of endless attempts to disperse inflation to 2.0%, the regulator will have to come up with ways to reduce it to the desired level. So, although the retail sales data were significantly better than expected, they did not relieve investors of their fears related to inflation.
Retail Sales (Europe):
The data of applications for unemployment benefits in the United States came out better than expected. And for the umpteenth time, the number of repeated requests is regularly predicted to increase, but their number is steadily going down. This time, they decreased from 4,785 thousand to 4,592 thousand. The number of initial requests decreased from 812 thousand to 779 thousand. So, the US labor market continues to recover, which of course still not a reason to rejoice.
Number of repeated Unemployment Insurance Claims (United States):
At the same time, the data yesterday on the applications gave reason to believe that the content of the report published today by the United States Department of Labor will be slightly better than the forecasts. But even if we proceed from the forecasts that exist, the content of the report will still be moderately positive. Yes, the unemployment rate itself should remain unchanged, but 45 thousand new jobs should be created outside of agriculture. This is certainly very, very small, but after the number of jobs decreased by 140 thousand in the previous month, even such a modest increase will be quite enough. So even if the forecasts are confirmed, the dollar has every reason to continue to strengthen its position.
Unemployment Rate (United States):
The EUR / USD currency pair continues to work in a corrective pattern from the peak of the medium-term upward trend, where the psychological level of 1.2000 has already fallen under the onslaught of sellers while maintaining a downward interest in the market.
The market dynamics are showing signs of acceleration, where the daily indicator on a stable basis exceeds the average level. The speculative activity is increasingly evident in the market that has a positive effect on volatility.
If we proceed from the current location of the quote, we can see a local slowdown within the 1.1960 mark, which is similar to consolidation.
As we can see on the trading chart in general terms, the daily period, the scale of the correction is visible, which has already returned the quote to the levels of the beginning of December last year.
It can be assumed that taking into account the downward mood, market participants can continue to work on the weakening of the European currency in the direction of 1.1900 to 1.1810.
An alternative scenario of the market development will be considered if the downward trend will stop, and the quote goes into an amplitude fluctuation along the psychological level of 1.2000.
From the point of view of a comprehensive indicator analysis, we can see that the indicators of technical instruments unanimously signal a sale by keeping the price below 1.2000.
