Pressure on the British pound returned after an unsuccessful technical correction to the area of major resistance at 1.2930, as well as after statements made today by the Irish Foreign Minister.
On the chart, it is clear how an unsuccessful attempt to break above the resistance of 1.2930 returns to the market major players who are betting on a further decline in the British pound in the face of a high probability of a hard Brexit and the absence of a trade agreement. The sharp return of the pound to weekly lows in the area of yesterday's support of 1.2860 occurred after statements made by the Irish Foreign Minister Simon Coveney, who once again drew attention to the huge number of obstacles to the conclusion of a basic trade deal between the UK and the EU. Coveney stressed that in the conditions under which negotiations are currently underway, it will not be possible to conclude a permanent and comprehensive agreement on future relations. The main problem remains the customs border, as well as issues of fishing and ensuring equality of conditions.
Data released today for the UK indicated that it is unlikely that the housing market recovery will continue in the near future. The report indicates that due to the next wave of coronavirus infection and the presence of other problematic fundamental factors, consumers should not expect much market growth. According to Halifax, house prices in the UK this September increased by 1.6% compared to the previous month. However, according to forecasts, until the end of the year, the pressure on the real estate market will only increase due to a decrease in cumulative demand, as well as due to a gradual increase in unemployment due to the coronavirus pandemic, which is expected in the UK by the beginning of winter this year.
Now let's talk about what reports were published today for the Eurozone countries, in particular for Germany. Many economists are now wondering how the German economy will perform closer to the middle of autumn this year, and whether there will be a significant slowdown in economic growth or the recovery will continue at a fairly good level.
The latest data on industrial production is not very encouraging, although there is no reason to panic. The report indicates that German industrial production declined in August compared to the previous month, however, this is due to temporary factors. Car production and the growth of new orders in recent months will allow us to talk about the continued recovery of the sector.
The main point that hit the overall indicator was the reduction in production in the manufacturing industry. Because of this, there is a rather unusual gap between the indicator of orders and total industrial production, which is likely to be rapidly reduced in the future. According to the Federal Bureau of Statistics Destatis, industrial production in Germany in August decreased by 0.2% compared to July and lost more than 9.6% per annum. Economists had forecast growth of 1.5%.
As noted above, the largest drop was observed in the manufacturing industry, where the indicator fell by 12.5% in August.
As for the technical picture of the EURUSD pair, much will now be envy from the behavior of buyers above the resistance of 1.1750, as well as from the Fed's protocols, which will show which one is still more – those who are in favor of increasing fiscal policy, or those who believe that the economy will continue to show rapid growth without this, and additional measures will only aggravate the situation that will need to be dealt with in the future, after trillions of balances and billions of budget deficits. Now buyers are aiming for a breakout of the 18th figure, and if those who bet on increasing stimulus measures "win" in the protocols, the pressure on the US dollar will return, and buyers of risky assets can confidently bet on updating the highs of 1.1840 and 1.1870 with an exit to the 19th figure. If the supporters of a more conservative approach, which was veiled by Donald Trump today, when he announced the postponement of discussions on a new package of assistance to the economy for the post-election period, then pressure on the euro will return, which will lead to a breakthrough of the week's lows in the area of 1.1700, and exit to the area of support 1.1650 and 1.1610.
But there is a third scenario, which provides for the absence of any market reaction to today's protocols, which is more likely.
Let me remind you that in his Twitter, Donald Trump wrote that he ordered to stop discussing the bill on support measures in the context of the COVID-19 pandemic. According to him, it is simply impossible to get the necessary concessions from the Democrats, so now it is best to focus on the presidential race, and return to the adoption of a new aid package after the election.
