Looking at the euro's chart, there is a feeling that European traders have gone completely mad and all hope is only for the American ones. After all, the weakening of the single European currency, despite good data on inflation, causes exactly such feelings. And as soon as the US traders got involved, everything went as it should. But, most likely, the thing is that investors do not believe that the increase in inflation, which was shown by preliminary data, will have any effect on the policy of the European Central Bank. Well, the subsequent growth of the single European currency was largely due to technical factors. Anyway, before that, the dollar strengthened well in many respects on an empty macroeconomic background. So we can say that a local overbought was formed on it, which needed to be corrected.
Nevertheless, inflation in Europe has not decreased, but increased. At least a preliminary estimate showed its acceleration from 0.1% to 0.3%. And this is despite the fact that we expected a slowdown to 0.0%. Logically, this indicates the possibility that the ECB will not take new steps to ease its monetary policy. But this did not stop market participants who continued to sell the euro. Apparently, investors do not believe that the ECB will ever be able to make any steps towards tightening monetary policy. Whether it is an increase in the refinancing rate or the termination of the quantitative easing program.
The final data on the index of business activity in the manufacturing sector of Europe will be published today, this should confirm the preliminary estimate, which showed an increase in the index from 39.4 to 46.9. However, it is unlikely that this data will have any effect on investor sentiment at all. Most likely, they will be ignored altogether. Moreover, the growth of the index is already embedded in the value of the euro. This was done just at the time of publication of the preliminary assessment.
Index of business activity in the manufacturing sector (Europe):
At the same time, it seems that we are seeing the process of consolidating positions on the dollar. Since the oddities were observed yesterday, not only in relation to the euro. Apparently, this is how investors are preparing for the release of the United States Department of Labor report, which will not be held on Friday this time, but on Thursday instead. In this regard, special attention should be paid to today's publication of ADP employment data. Moreover, this very employment can grow by as much as 3,000,000. And if these forecasts are confirmed, it will be the most impressive growth in employment, at least in the last two decades. And most likely, investors will take this data with enthusiasm, as it will show that the US labor market is beginning to recover after an unprecedented increase in unemployment. The United States will still publish final data on the index of business activity in the manufacturing sector, which should show its growth from 39.8 to 49.6. But, as in the case of Europe, these data are taken into account by the market at the time of publication of the preliminary assessment.
Employment change from ADP (United States):
From the point of view of technical analysis, we see another rebound in the price from the value of 1.1190, repeating the fluctuation of the period earlier. The activity of long positions is associated with the widespread consolidation of operations on the US dollar on the market, which led to a local jump in the European currency exchange rate to the value of 1.1260.
In terms of volatility, a consistently high indicator is recorded, which signals speculative activity that can lead to chaotic price jumps.
Considering the trading chart in general terms (the daily period), you can see a downward tact from the area of 1.1400/1.1440, where market participants have been trying to keep the quote for the second week, but the range level stands firmly in their way 1.1180 (1.1165//1.1180//1.1190).
We can assume that it won't be long until the price returns to the area of the range level of 1.1180, but the main question that traders face is whether the quote will be able to break through. It is worth recalling that the fact of a breakout of the range level will only be counted if the price is consolidated lower than 1.1165, otherwise we expect a bumpiness in the range of 1.1180/1.1250.
From the point of view of complex indicator analysis, we see that the indicators of technical instruments for the hourly and daily periods continue to signal a sale due to price being concentrated on the downward stroke.