On the first trading day of the week, the euro-dollar pair continued to drift around the middle of the 11th figure. Both the bulls and the bears of the pair could not win over the majority of market participants - the controversial US data has once again messed things up. By and large, the situation on Friday was repeated today, when an extremely weak report on the growth of the price index of GDP offset optimism about the growth of the US economy as a whole. Today, a mirror situation occurred: the PCE base price index showed a negative trend, while personal spending unexpectedly rose.
Such a kind of "balance" did not allow EUR/USD buyers to approach an important resistance level of 1.1240, the overcoming of which would finally dampen last week's downward momentum. But if we consider the situation within the day, the bulls still managed to maintain their advantage. This is understandable: after all, in the run-up to the Fed's May meeting, inflation rates one after another show a negative result. At the end of last week, the market turned its attention to the inflation component of US GDP. It is believed that this indicator is monitored by the Fed "with a special inclination" (like the PCE price index), therefore its negative dynamics largely offset the positive from the Friday release. The indicator came out at the level of 0.9%, although experts expected growth to 1.3 from the previous mark of 1.7%.
It is worth recalling that the basic inflation rate also disappointed traders - consumer prices, excluding food and energy prices, increased by only 0.1% in March after a weak growth of 0.2% in February. In annual terms, the consumer price index rose by only two percent. Although annual inflation is still at fairly high levels, a negative trend could alert the members of the regulator.
Thus, on the eve of the next Fed meeting, the fundamental picture emerges quite clearly: amid the growth of most of the US macroeconomic indicators, inflation indicators slowly but surely slide downwards. Therefore, today's release, despite all its ambiguity, was perceived negatively by the market. Buyers used this informational occasion and updated this week's high (1.1180). However, despite the correctional growth, the pair is still within the downward trend - and will remain until it consolidates above the Bollinger Bands average line on the daily chart.
On Tuesday - the last day of April - the EUR/USD bulls will have a chance to consolidate their success - and not only due to the possible weakness of US data. First, on April 30, data on the growth of the eurozone's GDP will be published, secondly, the level of European unemployment, and thirdly, data on the growth of German inflation. The growth rate of the European economy should accelerate to 0.3% (on a monthly basis) and to 1.2% - in annual terms. The unemployment rate is likely to remain at a record-low of 7.8%, providing traditional support for the euro. Good news is also expected from Germany: the German consumer price index should grow both in the monthly (+0.5%) and annual (+1.5%) terms. If such data are released at least at the forecast level (not to mention the stronger dynamics), the single currency will receive a reason for growth throughout the market, including the EUR/USD.
The US session on Tuesday is also eventful. First of all, it is necessary to pay attention to the labor cost index - according to some analysts, this is one of the "favorite" Fed inflation indicators. In the 4th quarter of last year, it fell slightly (to 0.7%), and in the first quarter of this year, a further decline is expected - to 0.6%. This indicator makes it possible for us to estimate the growth rate of wages in the United States and, accordingly, is a good indicator of inflationary pressure in the country. If it is disappointing (and even if it reaches the forecast level), investor concern about the reaction of Fed members will only increase.
In addition, an indicator of US consumer confidence will be released tomorrow. In March, it dropped sharply - from 131 points to 124th. The April results may also disappoint investors - according to preliminary data, the indicator will drop to 122 points. This fact in itself is not critical - however, in the context of other US releases, it can cause an extremely negative market reaction.
Thus, according to preliminary experts' forecasts, tomorrow's releases will be of multi-polar character - European statistics should support the euro, and the US will "drown" the dollar. If the real numbers coincide with the forecasts, the EUR/USD pair's correction will continue.
In a technical perspective, buyers of EUR/USD need to gain a foothold above the resistance level of 1.1240. At this price point, not only is the Bollinger Bands midline is drawn on the daily chart, but also the Tenkan-sen and Kijun-sen lines. If the bulls overcome this target, they can count on a return to the area of the 13th figure. Otherwise, the bears will return the price to the bottom of the 11th level.
