The dollar index returned to the 97-point area yesterday and the indicator's growth was rapid, reflecting the situation on the foreign exchange market. Greenback showed character in almost all dollar pairs with the only exception to the USD/JPY pair. Even the pound could not resist the pressure of the American currency, although the British tried to gain a foothold in the 30th figure on Tuesday morning. However, the EUR/USD pair was able to approach the key support level of 1.1180 (the bottom line of the Bollinger Bands indicator on the daily chart) but the bears could not impulsively break through this target.
According to the general opinion of experts, the dollar spread its wings thanks to the favorable corporate report. For this week, more than 150 reports will be published but the dollar has already responded to the release of the largest companies. However, the prospects for further growth of the EUR/USD pair will depend on Friday's data on the growth of the American economy. For example, the cost of Twitter shares jumped immediately by 14%, amid rising company profits. The indicator of "monetized users" increased by more than 10% y/y up to 135 million people, with a growth forecast of 128 million. Other companies also showed growth. In particular, the revenue and profits of such a giant as Coca-Cola increased all indicators exceeded the expectations of experts after which the value of shares increased by 2.5%. The value of shares and UTC increased by almost 4 percent as the profit and revenue of the group in the first quarter of this year grew steadily and were better than expected. One of the largest US banks, JPMorgan Chase, also surprised the market with record profits and revenues. In the first quarter, profits rose immediately by 5% due to the consumer lending segment. Similar dynamics were demonstrated by other large American companies, in particular, the PNC Financial Services and Disney.
This result really surprised traders because on the eve of the reporting period. Many experts expressed concern about this, which in their opinion, the profits of companies from the S&P 500 index could decline by almost two percent in annual terms. But the initial results exceeded expectations, the key indices including the S & P 500, the Dow Jones Industrial Average and the Nasdaq Composite showed a positive trend. Wall Street news also influenced the dynamics of the foreign exchange market, providing strong support to the dollar.
However, the US currency grew not only due to the stock market. After a long weekend, traders reacted quite vigorously to the first macroeconomic reports. Hence, on Monday and Tuesday, data on the volume of home sales in the primary and secondary markets were published. Moreover, if the "secondary housing market" failed, the indicator decreased by almost 5% after growth in February then the volume of sales of new buildings increased by 4.5%, exceeding the expectations of most experts. In terms of annual rates, this result is the maximum since November of the year before last.
The oil market also provides indirect support to the dollar. According to many analysts, the growth of quotations will have a positive impact on US inflation, thereby strengthening the position of the Fed hawks. Let me remind you that the day before yesterday, the US president said that Washington would not extend the "grace period" for those states that import Iranian oil. Therefore, despite the US sanctions, some countries of the world were "allowed" to buy black gold from Tehran. We are talking about eight countries: China, India, Japan, Greece, Italy, Turkey, South Korea, and Taiwan. Now (or rather, since May 2), Washington may impose sanctions against these countries if they continue to acquire Iranian oil. In turn, Tehran threatened to close the Strait of Hormuz, through which a significant amount of oil passes. The market reacted instantly and Brent jumped to $74.5.
Thus, the US currency enjoys the diverse support of various fundamental factors, which can not be said about the single currency. Hence, after three months of recovery attempts, the indicator of consumer confidence in the eurozone countries again showed negative dynamics, dropping to -7.9 points with a weak forecast to -7.0 p. In addition, traders are discussing the likelihood of lowering the credit rating of Italy by the agency S & P Global. At the moment, this rating is at the level of "BBB" with a negative outlook and S&P will worsen this rating a step lower this Friday, according to some experts.
Such a fundamental background creates a basis for further reducing the EUR/USD pair but a lot will depend on Friday's data on the growth of the American economy. If the US GDP in the first quarter goes below the forecast levels, especially the price index of GDP, then all the optimism of traders will be leveled. Here it is worth noting that the forecasts are rather weak, which in particular, the price index of GDP should drop significantly from 1.7% to 1.3%. This fact may have a strong pressure on the dollar even if the other indicators will be at the forecast level.
In technical perspective, the situation for the EUR/USD pair has not changed as the bears still need to push the support level of 1.1180 (the bottom line of the Bollinger Bands indicator on D1) and the bulls have to return above 1.1270 (the lower boundary of the Kumo cloud same timeframe). On Friday data, we can determine the motion vector of the pair, either the price will go towards the 10th figure or return to the range of 12-13 figures.