A new trading week begins, during which a lot of important macroeconomic information will be published. Unfortunately, traders continue to ignore most of it, so we still do not expect a strong reaction to the reports. We also continue to believe that technical factors play a key role in pricing the euro/dollar pair. We remind traders that quotes are now stuck between levels 1.0750 - 1.1000, which form a side channel with a width of 250 points. Thus, in the coming days, the pair may continue to move to the upper boundary of this channel, that is, to the 1.1000 level.
What awaits us in the new week in fundamental terms? There will be no macroeconomic publications either in the European Union or in the United States on Monday. Thus, on the first trading day of the week, nothing should interfere with the pair's movement along a given route and for a given purpose. At the same time, volatility can be extremely low on this day. The second trading day of the week will be a little more interesting, as the consumer price index for April will be published in the United States. In normal times, this figure would trigger a 100% market reaction. However, now this is far from the most primary indicator. Thus, almost any inflation value in the United States (and judging by forecasts, it should slow down to 0.8% in annual terms and lose 0.7% in monthly terms) is unlikely to provoke an increase in movement or a reversal in the market.
The third trading day of the week will be even more interesting, as the indicator of industrial production in the European Union for March will be published. That is, for the month when the epidemic was only gaining momentum, and the index of business activity in the manufacturing sector had already collapsed, but not as much as the service sector. According to expert forecasts, in monthly and annual terms, industrial production will decrease by 12%. And in April, this figure may decline even more. Thus, together with the previously published GDP for the first quarter, we can finally determine the approximate extent of the decline in production and the economy as a whole. 12% is a gigantic figure, but traders are already accustomed to the fact that both economies, European and American, continue to break the record. Actually, there is nothing surprising in this. The most important thing is to understand how much both economies will contract, and which of them will suffer big losses. This information can help determine the long-term prospects for the euro and the dollar.
Germany will publish its consumer price index on Thursday, and, for obvious reasons, traders will brush it off. The next report on applications for unemployment benefits in the United States will also be released on the same day, which predicts an increase in the total number of initial applications by another 2.5 million, and the total number of secondary can grow to 25.65 million.
Data on GDP in Germany and the European Union for the first quarter will be released on Friday, preliminary values of which were published several weeks ago, so negative values will not come as a surprise to traders. In the United States - retail sales, industrial production. The first indicator risks losing about 12% in monthly terms, the second - 12.3% in monthly terms. The industrial production indicators of the EU and the US can be compared this week. In monthly terms, state production fell by 5.4% in March, and a reduction of more than 12% is expected in the European Union. In annual terms, the US indicator lost 5.5%, while the European one may decrease by 13.6%. Thus, if the forecasts for the European indicator come true, it will be safe to say that in Europe the reduction will be two and a half times higher than in the United States. But the unemployment rate in the United States is incommensurably higher...
Most states will open in America (43 out of 50) in the upcoming week. "Opening" means the complete or partial removal of quarantine measures, the resumption of business and companies. Thus, despite the epidemic, which continues to run amok in the United States, President Donald Trump can be said to have achieved his goal. The total number of infections in the US is already 1.3 million. 200 thousand people recovered, 79 thousand died. According to various experts, the US economy and Donald Trump simply can no longer afford to be in quarantine. Thus, despite the high risks of the second wave of the epidemic, the US economy will begin to restart. And what will come of this in terms of the growth rate of the spread of the COVID-2019 virus and in terms of the rate of economic recovery, we will be able to find out in the coming weeks. At the same time, US chief epidemiologist Anthony Fauci, who, one might say, became famous in recent months due to the fact that he regularly refutes Donald Trump's statements, goes into self-isolation after having contact with a coronavirus infected White House employee . Fauci will continue to work from home and take daily tests for the coronavirus. Recent tests have shown that he is not infected.
The technical picture of the EUR/USD pair shows that the upward movement can continue with the target level of 1.0990 (1.10), which is the upper border of the side channel. Thus, we expect overcoming the Senkou Span B and Kijun-sen lines with the subsequent upward movement in the coming days. At the same time, a rebound from the critical line may trigger a resumption of the downward movement with the target of 1.0750. And overcoming the 1.0750 level will form a new downtrend.
Trading recommendations for the EUR/USD pair:
We believe that the influence of the fundamental background may be present next week, however, there are no concrete grounds for such a hypothesis. Trading is still recommended on a 4-hour timeframe. Overcoming Senkou Span B and Kijun-sen lines will enable opening long positions with the target of 1.0990.
Explanations for illustrations:
Ichimoku indicator:
Tenkan-sen is the red line.
Kijun-sen is the blue line.
Senkou Span A - light brown dotted line.
Senkou Span B - light purple dashed line.
Chikou Span - green line.
Bollinger Bands Indicator - 3 yellow lines.
The MACD indicator is a red line and a histogram with white bars in the indicators window.
Classic support / resistance levels - red and gray dashed lines with price symbols.
Pivot level - yellow solid line.
Volatility levels are red solid lines.
Possible price movement options:
Red and green arrows.
