Portugal GDP Falls 3.9% In Q1

Trading 15 mai 2020 Commentaire »

Portugal's economy contracted drastically in the first quarter as both domestic demand and exports weakened due to the disruption caused by the coronavirus, or Covid-19, pandemic from March, flash estimates from Statistics Portugal showed on Friday. Gross domestic product decreased 3.9 percent from the fourth quarter, when the economy expanded 0.7 percent. Domestic demand dropped 1.9 percent, exports fell 7.3 percent and imports decreased 2.9 percent. On a year-on-year basis, GDP decreased 2.4 percent in the first quarter after a 2.2 percent increase in the previous three months. Net exports made a negative contribution of 1.4 percent. Domestic demand also contributed negatively, -1 percent, for the first time since the third quarter of 2013 amid decreases in private consumption and investment.

In a bid to contain the Covid-19 pandemic, Portugal closed schools and universities on March 16 and declared a state of emergency on March 18 that led to the temporary closure of several economic activities and the restriction on the free movement of persons, the statistical office said.


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Hungary GDP Growth Halves In Q1

Trading 15 mai 2020 Commentaire »

Hungary's economic growth rate more than halved in the first quarter of this year as the coronavirus, or Covid-19, pandemic hurt production in most sectors, preliminary estimates from the statistical office showed on Friday.

Gross domestic product grew an unadjusted 2.2 percent year-on-year following a 4.5 percent increase in the fourth quarter of 2019. Economists had expected 2 percent growth. On a calendar-adjusted basis, the annual growth rate slowed to 1.8 percent from 4.5 percent in the previous quarter. After seasonal and calendar adjustments, GDP rose 2 percent year-on-year after a 4.4 percent growth in the previous three months. Compared to the previous quarter, the Hungarian economy shrank 0.4 percent in the first quarter after a 0.7 percent expansion in the previous three months.


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Romania GDP Growth Slows Sharply In Q1

Trading 15 mai 2020 Commentaire »

Romania's economy grew at a sharply slower pace in the first quarter, as economic activity started getting impacted by the coronavirus pandemic, preliminary figures from the statistical office showed on Friday.

Gross domestic product decreased a seasonally adjusted 0.3 percent from the previous quarter, when the economy expanded 1.2 percent. On a year-on-year basis, GDP grew 2.7 percent after a 3.9 percent increase in the previous three months. Without adjustments, GDP rose 2.4 percent annually in the first quarter after a 4.3 percent increase in the fourth quarter of last year.


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Dollar Lower As U.S. Retail Sales Plunge, Trade Worries Mount

Trading 15 mai 2020 Commentaire »

The U.S. dollar declined against its most major counterparts in the European session on Friday, as retail sales plunged more than expected in April and the U.S. government changed rule to block shipments of semiconductors to Huawei Technologies.

Data from the Commerce Department showed that retail sales cratered by 16.4 percent in April after tumbling by a revised 8.3 percent in March. Economists had expected retail sales to plummet by 12.0 percent compared to the 8.7 percent slump originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales plunged by an even steeper 17.2 percent in April after falling by a revised 4.0 percent in March.

Ex-auto sales were expected to tumble by 8.6 percent compared to the 4.5 percent nosedive originally reported for the previous month.

Trade tensions intensified after the Trump administration said it is blocking shipments of semiconductors to China's Huawei Technologies.

The Commerce Department said it was changing an export rule to "strategically target Huawei's acquisition of semiconductors that are the direct product of certain U.S. software and technology."

The greenback fell to 106.86 against the yen, from a 3-day high of 107.43 seen at 8:00 pm ET. The greenback is seen finding support around the 101.00 region.

Data from the Bank of Japan showed that Japan producer prices fell 1.5 percent on month in April - missing forecasts for a decline of 0.9 percent, which would have been unchanged from the March reading.

On a yearly basis, producer prices sank 2.3 percent versus forecasts for a decline of 1.6 percent following the 0.4 percent drop in the previous month.

The greenback dropped to 1.0851 against the euro and 0.9698 against the franc, after rising to 1.0789 and 0.9745, respectively in early deals. The greenback may face support around 1.00 against the euro and 0.90 against the franc.

In contrast, the greenback rose to 1.2145 against the pound, its highest level since March 27. On the upside, resistance is likely seen near the 1.19 level.

The greenback hit a new 3-week high of 0.5944 against the kiwi, from a 2-day low of 0.6016 set at 7:15 pm ET. The greenback is likely to face resistance around the 0.56 region, if it gains again.

The greenback bounced off to 1.4110 against the loonie and 0.6418 against the aussie, from its early 2-day lows of 1.4018 and 0.6474, respectively. The next likely resistance for the greenback is seen around 1.45 against the loonie and 0.60 against the aussie.


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U.S. Business Inventories Drop In Line With Estimates In March

Trading 15 mai 2020 Commentaire »

Reflecting notable decreases in manufacturing and wholesale inventories, the Commerce Department released a report on Friday showing a modest drop in U.S. business inventories in the month of March.

The report said business inventories edged down by 0.2 percent in March after falling by a revised 0.5 percent in February.

Economists had expected inventories to dip by 0.2 percent compared to the 0.4 percent drop originally reported for the previous month.

The modest decrease in business inventories came as manufacturing and wholesale inventories both fell by 0.8 percent, more than offsetting a 1.0 percent jump in retail inventories.

Meanwhile, the Commerce Department said business sales plunged by 5.2 percent in March following a 0.5 percent decrease in February.

Manufacturing and wholesale sales both tumbled by 5.2 percent, while retail sales plummeted by 5.3 percent.

With sales falling by much more than inventories, the total business inventories/sales ratio surged up to 1.45 in March from 1.38 in February.


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U.S. Consumer Sentiment Unexpectedly Improves In May

Trading 15 mai 2020 Commentaire »

With stimulus checks improving consumers' finances and widespread price discounting boosting buying attitudes, the University of Michigan released a report on Friday showing an unexpected improvement in U.S. consumer sentiment in the month of May.

The report said the consumer sentiment index rose to 73.7 in May after plummeting to 71.8 in April. The rebound surprised economists, who had expected the index to slip to 68.0.

The unexpected increase by the headline index came as the current economic conditions index jumped to 83.0 in May from 74.3 in April.

On the other hand, the report said the index of consumer expectations fell to 67.7 in May from 70.1 in the previous month.

"Personal financial prospects for the year ahead continued to weaken, falling to the lowest level in almost six years, with declines especially sharp among upper income households," said Surveys of Consumers chief economist Richard Curtin

He added, "Improved views on buying conditions were due to discounted prices and low interest rates, although their impact was partially offset by uncertainties about job and income prospects."

On the inflation front, one-year inflation expectations surged up to 3.0 percent in May from 2.1 percent in April, while five-year inflation expectations inched up to 2.6 percent from 2.5 percent.

Curtin called the jump in one-year inflation expectations "perhaps the most surprising finding" in the survey, noting there were "wide differences across age and income subgroups."


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U.S. Industrial Production Plunges Amid Collapse In Manufacturing Output

Trading 15 mai 2020 Commentaire »

The Federal Reserve released a report on Friday showing a record drop in U.S. industrial production in the month of April, as the COVID-19 pandemic led many factories to slow or suspend operations throughout the month.

The report said industrial production plummeted by 11.2 percent in April after tumbling by a revised 4.5 percent in March.

Economists had expected production to plunge by 11.5 percent compared to the 5.4 percent nosedive originally reported for the previous month.

Andrew Hunter, Senior U.S. Economist at Capital Economics, noted the steep drop was "sharper than at any point in the index's 101-year history, including the Great Depression, the end of World War 2 and the Global Financial Crisis."

"Output will rebound from May onwards, as factories begin to reopen, but the early signs are that the recovery is set to be gradual," Hunter added.

Manufacturing output led the way lower, cratering by 13.7 in April amid a 70 percent collapse in the output of motor vehicles and parts.

Mining output also tumbled by 6.1 percent in April, while utilities output showed a relatively modest 0.9 percent decrease.

The report also said capacity utilization slumped to 64.9 percent in April from a revised 73.2 percent in March. Capacity utilization had been expected to plunge to 64.0 percent.

Capacity utilization in the manufacturing and mining sectors plummeted to 61.1 percent and 81.7 percent, respectively, while capacity utilization in the utilities sector dipped to 71.1 percent.


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EUR/USD and GBP/USD. Results of May 15. Macroeconomic US data supported the euro, but could not help the pound

Trading 15 mai 2020 Commentaire »

4-hour timeframe

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Average volatility over the past five days: 70p (average).

The EUR/USD pair began a new round of correctional movement on Friday, May 15. However, the correctional one is only for formality, since there is no trend right now, and therefore movement in the side channel cannot be called corrections. Yes, even though the pair has been stubbornly trading over the last few days of the consolidation channel 1.0750 - 1.1000, the price still cannot leave it. Moreover, in recent days this channel has narrowed to 100 points and now trading takes place in the 1.0774 - 1.0882 range. Thus, we have at our disposal not just a consolidation channel, but an open flat. Today, when macroeconomic data were published only in the EU and the US, the euro/dollar rose in price for the euro and the pound/dollar rose in price for the dollar. Given the fact that macroeconomic data were weak in both the European Union and the United States, it is surprising that there is no correlation between the two main pairs. But this fact allows us to conclude that the macroeconomic background continues to be ignored by market participants. Or traders react very selectively to reports. In the second case, the picture does not become easier, since it is impossible to predict in advance which report will be ignored.

GDP in Germany for the first quarter in a preliminary estimate was released today. According to this report, GDP fell by 2.3% in annual terms, which isn't a lot. But the fact that the German economy most staunchly opposed the coronavirus was not a secret. Thus, the German economy is likely to suffer the smallest losses among all EU member states. Afterwards, a similar indicator was published in the European Union. Things were worse here than Germany, and GDP declined 3.2% on an annualized basis. However, firstly, these figures are not final, that is, the final values may be worse, and secondly, GDP may continue to slow down in the second quarter, although many countries begin to weaken quarantines. In general, any contraction in the economy is a contraction, which is bad for the currency. However, the euro has been growing against the dollar since the morning, so we conclude that traders have ignored GDP data. In the afternoon, overseas data on retail sales came in, which not only turned out to be bad, but was just completely disappointing. The main indicator of retail sales decreased in April by 16.4% m/m, retail sales excluding automobile sales decreased by 17.2%, and the retail control group lost 15.3%. Market participants were expecting almost half as weak data. Industrial production also lost more than 10% in April, namely 11.2%, but traders were ready for such losses. Immediately after their publication, the European currency accelerated its growth, therefore, it is possible that these reports, and only in the euro / dollar pair, were won back by market participants.

Meanwhile, the news flow from the White House does not stop for a single day. Today we learned that Donald Trump lost five of his acquaintances because of the coronavirus epidemic, two of whom were friends. Trump did not disclose who exactly died from his circle of friends. And on the one hand, this statement can be considered as Trump's acknowledgement, and on the other hand, the US president can once again mislead Americans and the whole world, as has already been done several times. Recall that a few months ago, YouGov calculated that Trump makes approximately 14.7 false or untrue statements on the day. Everyday. Therefore, the "Trump's friends" may be ordinary porters in one of his hotels. We do not claim that Trump did not lose anyone, but such a message may be designed to bring the American president closer to the American population, which has already lost more than 80,000 of its fellow citizens.

4-hour timeframe

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Average volatility over the past five days: 117p (high).

The GBP/USD pair continued its downward movement on May 15 and it fell to the second support level of 1.2164 by the end of the day. This is the lowest level of April 7 and, most likely, it will be overcome today. If this happens, the pound/dollar pair will leave the side channel and begin forming a new downward trend. Market participants continue to ignore macroeconomic data. For example, today two quite important reports were published in the United States, which turned out to be absolutely disastrous. Nevertheless, it was the US dollar that continued to rise in price on the last trading day of the week. The general fundamental background, it should be noted, does not remain on the side of the British pound, as in the UK a serious economic contraction is expected due to the coronavirus crisis, as well as due to Brexit, due to the lack of trade deals with the European Union and the United States, for Boris Johnson's reluctance to extend the transition period. Thus, even in conditions when all the economies in the world are experiencing serious problems, the British remains one of the first places on this list. Consequently, the pound coils fall again, to the lows of March 20 - about 1.1411.

Recommendations for EUR/USD:

For short positions:

The EUR/USD pair started a new upward movement and worked out the critical Kijun-sen line on the 4-hour timeframe. Thus, it is recommended to consider selling the euro while aiming for the 1.0780 - 1.0750 range just in case the price rebounds from the Kijun-sen line.

For long positions:

It is recommended to open new long positions in small lots with the aim of the Senkou Span B line, if traders overcome the critical line.

Recommendations for GBP/USD:

For short positions:

The pound/dollar pair continues a rather strong downward movement. Thus, traders are advised to sell the pair with targets 1.2078 and 1.2062.

For long positions:

It is recommended that purchases of the GBP/USD pair be considered with a view to the Senkou Span B line after consolidating quotes above the critical line, but in small lots.

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Stock markets indecisive

Trading 15 mai 2020 Commentaire »

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The stock market in Europe has been on the rise today. Most indices rose in price. The reason for all the positive attitude of market participants from America. Recall that yesterday's trading session has become one of the strongest in recent years. China also added some positive news, as it was able to achieve the best pace in industrial production, despite very modest forecasts.

The German DAX index rose 1.3%, the French CAC 40 index also rose 0.9%, and the UK FTSE index, which grew 1.2%, did not lag behind.

Pleased with the market data on the growth of industrial production in China. It is reported that this indicator became 3.9% higher in April compared to the previous month. Moreover, the growth rate of industrial production in reality turned out to be much higher than the expected values. Most analysts were inclined to believe that they could not rise above 1.5%. The increase in positive dynamics may indicate that China's industry, contrary to estimates, is moving to a process of active recovery. Some fears can only be caused by the fact that retail sales in the state have plunged quite seriously, their decline amounted to about 7.5%. But even this could not spoil the mood in the market.

However, not without negativity. Thus, Germany's GDP unexpectedly seriously declined. The fall amounted to 2.2%, such figures have not been recorded for more than ten years since the crisis of 2009.

At the same time, the Asian stock market remained indecisive from news of the strengthening of the Chinese economy.

So, the Shanghai Composite index became slightly higher - by 0.02%, which was some compensation for the fall that occurred with it a day earlier. The Shenzhen Component Index, by contrast, declined 0.04%. The Hong Kong Hang Seng Index followed, which fell 0.35%. Japan's Nikkei 225 Index posted an increase of 0.05%, while Korean KOSPI fell 0.02%. However, the Australian ASX 200 Index achieved the most significant results, an increase of 0.87%.

The Asia-Pacific region, in addition to data on industrial production in China, also estimated other statistics. So, the attention of investors was focused on the total number of unemployment claims in the United States of America. Recall that their number for the current week reached 2.981 million, and this reflects an increase of 36 million.

In addition, tensions between the US and China continue to worsen amid accusations by President Donald Trump towards his Chinese counterpart. Recall that the US leader believes China is guilty of the widespread spread of coronavirus infection, under the influence of which the economies of many countries of the world are collapsing. So far, none of the analysts has decided to judge what this tension will lead to and what sanctions against China will take effect. However, it is already clear that this process itself confuses market participants by limiting their actions.

There is also serious pressure on concerns about the new wave of the COVID-19 pandemic. Many experts believe that the removal of quarantine measures is too premature.

One way or another, analysts believe that in the short term, forecasts are more than favorable, but long-term ones may be in deep negative.

Naturally, this does not add to the positivity of investors who still prefer to work discreetly in the market.

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EURUSD-1.0 Waiting for the euro to be on par with the dollar?

Trading 15 mai 2020 Commentaire »

Hello. The world is gradually plunging into the chaos of negative interest rates and sliding into a swamp of economic stagnation. Unemployment in the United States has reached 36 million. Central banks and governments are feverishly seeking a way out of this situation. The economy hit the bottom, but continues to slide into the abyss of depression, and only stock markets, bouncing cheerfully from the lows, returned to last summer's figures.

There has been a relative lull in the foreign exchange market, following the jump in volatility back in March, which can explode in a storm and parity between the euro and the dollar, which analysts and traders have been talking about for many years, may come true much earlier than we expect, for example, this fall. This is of course just a hypothesis, but I have grounds for this assumption, with which I will introduce the readers of this article.

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To begin, let's recall the fundamental tenets of the forex market, which, despite all the efforts of central banks to turn the world upside down, continue to work.

All things being equal, investors prefer the US dollar;

Any investment is compared to an investment in government treasury bonds;

Since you and I live in the era of the US dollar, which is the globally recognized equivalent of value, there must be good reason for investors or ordinary citizens to keep money in other currencies. A resident of Europe is unlikely to want to have a dollar in his pocket, because he simply does not need it. Goods in European stores are not sold for dollars; services within the EU are not sold for dollars. However, considering investment opportunities, a resident of the European Union will immediately see that investing in dollars will bring him more income than investing in euros. So, at least, it was before the start of the Covid-19 epidemic. And now, investments in Europe are associated with significant difficulties.

An international investor acts from a different position, on the contrary, he needs the greenback, because he can get everything that his heart desires using the dollar, while he can buy only a limited amount of assets with the euro. In other currencies, the situation is even worse, assets denominated in RMB, pounds, or rupees are catastrophically small, and most importantly, investing in these assets, the investor acquires additional currency risk. So why should an investor buy the euro, where for several years now, government bond yields have been negative, the situation with the coronavirus epidemic is not much better than in the United States, and there are very few stock assets showing stable growth.

The depreciation of the euro that we observed in 2018-2020 was a reflection of the difference in interest rates between the euro and the dollar. It would seem that now, when the rates in these currencies are practically equal, the markets should go into the trading range, but you need to clearly understand that a priori - the euro is the dominant currency, and the dollar is the dominant currency, and while the situation in the eurozone will be the way it is now or worse, the euro will be under pressure.

For the sake of objectivity, it should be noted that foreign investors are now actively leaving the US market. This is clearly seen in Open Interest (OI) in the euro futures contract traded on the CME. According to the Commitment of Traders report (COT), OI in the futures of the euro decreased from 754 to 605,000 contracts since March 13, and the total position of institutional investors decreased by a third, from 305 to 226,000 contracts. However, this rather means a loss of interest of European investors in investments in dollars, rather than an increase in the desire to invest in euros.

So how are things in Europe? The prospects for the eurozone are now significantly worse than those of the United States. According to the IMF forecast, according to the results of the COVID-19 epidemic, the European economy will fall by 7.5%, while the US economy will fall by about 5%. Thus, in the current situation, the euro is doomed to stay in a downward trend simply because Europe cannot offer investors anything attractive right now.

Of course, you need to understand that the central banks strictly monitor exchange rates, and Donald Trump will not fail to reproach the European Union for manipulating exchange rates, and promises to introduce duties against it. However, in the fall, Trump will not be in the EU, he would win the election and stay for a second term, so the euro has a window of opportunity for reduction. Moreover, in conditions of falling demand, dumping, including currency dumping, is a good way to conquer markets. However, Saudi Arabia did not succeed.

From a technical point of view, the EURUSD currency pair has been in a declining trend since 2018, and in March - April 2020 formed a graphic "pennant" figure, which, according to the postulates of technical analysis, should be broken down by the size of a flagpole, which is about 800 points. If this happens, the course will drop to the level of parity - 1 to 1.

By the way, a similar situation was four years ago, when the US president just took office. Then, the EURUSD rate was also on the verge of parity, but through agreements and direct manipulations, the Federal Reserve and the European Central Bank managed to raise the euro to the level of 1.27 against the dollar.

In general, it can be assumed that none of the parties is interested in depreciating, but now the conditions in the markets are somewhat different than they were in 2016-2017. It is possible that the US's European allies will decide to take advantage of Trump's election campaign or simply don't agree with the Fed in the face of a falling European economy, which could result in the European currency's collapse. Not the fact that this will happen, no one knows the future, including myself, but we need to take such a scenario into account.

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Risk of EU collapse, according to Black Rock Corp. Institute of Analysis

The European Union is now very weak. Here is what the analysts of the Black Rock investment corporation write about this: - "After the initial disagreements in Europe, a united front emerged, characterized by a common approach to border control and export restrictions, as well as widespread unconditional support from the ECB to help finance costs, related to the pandemic. Efforts are currently underway to develop a comprehensive, significant and overall recovery strategy after isolation. Significant progress has already been made, but the shock is COVID-19, and the economic consequences will test the cohesion of the EU as never before. At the present time, we believe it unlikely surge of populism, but its renewal is likely once the acute phase of the outbreak will take place and will clear the scale of the economic damage."

As we can see from the chart, a surge of negativity associated with the inability of the European Commission to respond quickly to the emerging crisis and tension between the Italian government and Brussels, trade contradictions and the uncertainty associated with Brexit create additional problems for Europe. Although in its history the European Union has experienced many crises, the economic consequences that have arisen after the pandemic, if they do not lead to the collapse of the EU, can significantly weaken the euro in the confrontation with the dollar. However, there is no doubt that the Euro-Atlantic elites will make every effort to prevent the collapse of the monetary union of the euro and the dollar. Be careful and cautious, follow the rules of money management. May the coronavirus pass us by!

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