The single European currency continued its rise after the pound, in the wake of extremely optimistic statements about the possibility of an early conclusion of a divorce agreement. It's just that on Friday they didn't yet know that on the weekend, the European Union would start asking extremely uncomfortable questions. So emotions were the only driving force behind the growth of the single European currency.
At the same time, there are no special reasons for joy. The total inflation data in Germany confirmed a preliminary estimate, which showed its deceleration from 1.4% to 1.2%. In Spain, the fourth eurozone economy, inflation has remained extremely low at 0.1%. Just by some miracle, it has not yet slipped into deflation.
Inflation (Germany):
Today is a holiday in the United States, so European traders will have to work without their US counterparts. Although this usually leads to an incredible lull in the markets, today the picture may be somewhat more interesting. It is obvious that the single European currency is overbought. Not as much as the pound. Nevertheless, any negative news regarding Brexit will do its dirty work, and will become an occasion for a local correction. Moreover, there are more than enough reasons. In fact, the weekend talks did not succeed. Michel Barnier said that London's proposals on the Irish border could jeopardize a single European market, as they are not specific. If these issues are not resolved, then in the current form, the proposals of the UK can contribute to a massive increase in financial and trade fraud, which cannot be allowed. At the same time, there is practically no time left, since the new version of the agreement should be ready by Thursday, so that the heads of the European Union countries could consider it during the upcoming summit. So the situation is clearly not as joyful as it might have seemed at the end of last week.
But Europe has bigger problems. While everyone is enthusiastically busy discussing Brexit, the current state of affairs somehow faded into the background. But industrial production in Europe has dropped by 2.0%, and today's data may show a deepening recession to 2.5%. So it's high time for European officials to take their minds off of the endless negotiations, and finally tackle the real deal. It may happen that after reaching an agreement that suits everyone, it will be completely unnecessary, due to the catastrophic state of the economy.
Industrial Production (Europe):
The EUR/USD pair, working out the psychological level of 1.1000, in terms of support, again resumed the upward move, showing high volatility on the way. Analyzing the past oscillation in more detail, we see that there was a characteristic impulsive move that led us to the area of 1.1062, after which a pullback occurred. In terms of the daily review, the picture is not quite the best in the form of a global trend, since the correction has been delayed and there are already prerequisites for converting it into an oblong correction.
It is likely to assume that after such a rapid upward move, it is most logical to expect a recovery towards 1.1000, and only then further analyze the behavior of the quote relative to the psychological level, for consolidation points.
Concretizing all of the above into trading signals:
- Long positions, we consider in the event that we find a foothold in the region of the level of 1.1000, followed by testing.
- Short positions, we consider lower than 1.1023, with the prospect of a move to 1.1000. Further actions are already considered in case the price is clearly consolidated below 1,1000.
From the point of view of a comprehensive indicator analysis, we see that most of the time periods where the indicators are plotted signaling an upward trend, reflecting some belated signal. Short-term periods have already entered the recovery phase, signaling sales.
