As expected, in the absence of US traders who were on holiday last Friday due to the Independence Day occasion, nothing happened in the market at all. Although the euro had a reason for growth. So as soon as the new trading week began, market participants quickly began to win back Friday's data, and at the same time, they are preparing for today's publication of retail sales data.
The final data on business activity indices in Europe were slightly better than forecasts, the market did not react to this in any way but due to the holiday in the United States. Thus, the index of business activity in the services sector rose from 30.5 to 48.3. The composite PMI rose from 31.9 to 48.5. At the same time, the preliminary estimate showed an increase in the index in the service sector to 47.3, and the composite index to 47.5. So the market began to win back such positive news with the beginning of a new week.
The composite index of business activity (Europe):
However, the growth of the indices at the time of publication of the preliminary assessment was included in the cost of the euro. And a slightly more active growth, and even with a delay, could not in itself provide the euro with sharp growth. So to some extent, traders are anticipating retail sales growth in Europe, which should increase by 14.8%. But this is in monthly terms. On an annual basis, the rate of decline should slow down from -19.6% to -8.6%. There is no doubt that this is a very positive factor, indicating that the European economy is trying to recover from a deep recession, partly caused by restrictions due to the coronavirus epidemic.
Retail sales (Europe):
But business activity indices are growing not only in Europe, but also in the United States. What the final data on these indexes should confirm today. Thus, the index of business activity in the service sector should grow from 37.5 to 46.7. The composite index is expected to grow from 37.0 to 46.8. But in theory, this should not affect the market in any way, since all this has already been taken into account by traders when the preliminary assessment was released. However, the single currency is growing quite noticeably, and this is against the background of playing back the previous data, and before the release of others. In other words, the euro's growth right here and now is not fully justified. So the US data could be a reason for a small adjustment.
The composite index of business activity (United States):
From the point of view of technical analysis, we see a sharp surge in activity during the Asian session, where after Friday's stagnation, speculators could not sit still, and eventually returned the quote to the limits of the highs of the previous week. In terms of dynamics, there is a gradual decline in volatility, but it is still insignificant, and speculative excitement is still high. Regarding the details of the fluctuation, it is worth highlighting the horizontal price movement, which has been going on for the third week, periodically changing the width of the 1.1180/1.1300 ---> 1.1180/1.1350 range.
It is worth considering that the range level of 1.1180 [1.1165//1.1180//1.1190] plays an integral role in the structure of the range, as well as the market mood of speculators.
Considering the trading chart in general terms (daily period), you can see that variable ranges are nothing more than stagnation at the conditional peak of inertia.
We can assume that the area of 1.1285/1.1300 will once again put pressure on market participants, resulting in a slowdown and a rebound in the opposite direction, which, in turn, will resume the course within the previously established range of 1.1180/1.1300.
An alternative scenario will be considered if the price is pinned higher than 1.1305, which will lead to a local move towards the variable border of 1.1350.
From the point of view of complex indicator analysis, we see that the indicators of technical instruments for minute and hour periods signal a purchase due to a local upward rise.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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