DIHK Sees Double-digit Drop In German GDP This Year

Trading 19 mai 2020 Commentaire »

The German economy is set to shrink at a double-digit rate this year due to the disruption caused by the coronavirus, or Covid-19, pandemic, the German Chamber of Commerce and Industry, or DIHK, said Tuesday.

Gross domestic product will probably fall by at least ten percent, the group said as it presented the results of a survey of the manufacturing sector. The survey showed that almost three quarters of all industrial companies reported falling demand and that several companies are scaling back their investments. They are also switching their supply chains to regional and European suppliers. "The global corona pandemic hits the German manufacturing right in the heart," DIHK President Eric Schweitzer said. "That is also why we will experience a historic economic downturn this year."

The DIHK survey also showed that manufacturers are expecting a drastic decline in demand for German exports as they see a global economic crisis looming.


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USDJPY shows signs of strength….

Trading 19 mai 2020 Commentaire »

USDJPY has managed to break above the recent highs at 107.62 and has now formed a sequence of higher highs and higher lows. This pattern has now potential to push price towards 108.55 and why not higher.

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Black lines - wedge pattern

Red lines - equal size move

USDJPY has broken above the wedge pattern and this was a bullish signal. USDJPY has since then pulled back forming a new higher short-term low and is now moving to new short-term higher highs. Trend is bullish as long as price is above 106.77. USDJPY bulls will now be targeting 108.60. Bulls remain in control as long as price is above 106.77

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Short-term Ichimoku cloud indicator analysis of EURUSD for May 19, 2020.

Trading 19 mai 2020 Commentaire »

EURUSD has reached as expected the Ichimoku cloud resistance at 1.0985 and got rejected. Price is turning lower forming a bearish candlestick pattern, confirming the importance of the Cloud resistance.

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On a daily basis trend remains bearish as long as price is below the Kumo. Breaking above the tenkan-sen and kijun-sen has led price to a move towards the Kumo (cloud). Price got rejected at the lower boundary of the Kumo and is now pulling back. Support is found at 1.0870. Failure to hold above this support level will increase the chances of breaking below 1.08 towards 1.07.

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South Africa Manufacturing Output Falls In February

Trading 19 mai 2020 Commentaire »

South Africa's manufacturing output declined in February, data from Statistics South Africa showed on Tuesday.

Manufacturing output fell 2.1 percent year-on-year in February, following a 1.8 percent decline in January.

The biggest negative contributions came from basic iron and steel, non-ferrous metal products, metal products and machinery, wood and wood products, paper, publishing and printing, textiles, clothing, leather and footwear, glass and non-metallic mineral products and motor vehicles, parts and accessories and other transport equipment.

On a month-on-month basis, manufacturing output rose 2.3 percent in February, after a 3.0 percent rise in the preceding month.

For the three months period ended in February, manufacturing output fell 2.2 percent, following a 1.7 percent decrease in the previous three months.


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U.S. Housing Starts Plunge More Than Expected In April

Trading 19 mai 2020 Commentaire »

Reflecting the impact of the coronavirus-induced economic shutdown, the Commerce Department released a report on Tuesday showing another steep drop in new residential construction in the U.S. in the month of April.

The report said housing starts plummeted by 30.2 percent to an annual rate of 891,000 in April after tumbling by 18.6 percent to a revised 1.276 million in March.

Economists had expected housing stocks to plunge by 23.8 percent to a rate of 927,000 from the 1.216 million originally reported for the previous month.

The steeper than expected drop in housing starts reflected substantial decreases in both single-family and multi-family starts.

Single-family starts dove by 25.4 percent to a rate of 650,000, while multi-family starts cratered by 40.5 percent to a rate of 241,000.

The Commerce Department said building permits also slumped by 20.8 percent to an annual rate of 1.074 million in April after falling by 5.7 percent to a revised 1.356 million in March.

Building permits, an indicator of future housing demand, had been expected to nosedive by 26.1 percent to a rate of 1 million from the 1.353 million originally reported for the previous month.

Single-family permits plunged by 24.3 percent to a rate of 669,000, while multi-family permits tumbled by 14.2 percent to a rate of 405,000.

Compared to the same month a year ago, housing starts in April were down by 29.7 percent and building permits were down by 19.2 percent.

On Monday, the National Association of Home Builders released a separate report showing a rebound in homebuilder confidence in the month of May.

The report said the NAHB/Wells Fargo Housing Market Index climbed to 37 in May after plummeting to 30 in April. Economists had expected the index to rise to 33.


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Portugal Producer Prices Fall For Tenth Month

Trading 19 mai 2020 Commentaire »

Portugal's producer prices fell for the tenth straight month in April, figures from Statistics Portugal showed on Tuesday.

The producer price index decreased 5.5 percent year-on-year in April, following a 2.1 percent decline in March.

Excluding the energy group, producer prices fell 1.0 percent in April, following a 0.8 percent decrease in the previous month.

Prices for energy declined 22.3 percent annually in April and those of intermediate goods fell by 2.9 percent.

Meanwhile, prices for investment goods rose 0.2 percent.

On a month-on-month basis, producer prices decreased 2.8 percent in April, following a 0.9 percent fall in the prior month.


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Sweden Budget Deficit To Widen On Support Measures

Trading 19 mai 2020 Commentaire »

Sweden's budget deficit is set to widen this year as government has taken support measures to combat downturn caused by the coronavirus, or Covid-19, the National Debt Office said Tuesday.

The budget deficit is forecast to widen to SEK 402 billion this year before narrowing to SEK 76 billion next year.

The Debt Office is meeting the deficit by increasing borrowing in all debt instruments.

"This is an exceptional situation we are in, with great uncertainty, but the Debt Office has good preparedness to increase borrowing," Director General Hans Lindblad said.

Earlier, the government had forecast a budget shortfall of SEK 14 billion each for 2020 and 2021.

The government forecast GDP to fall 6.5 percent this year and expand 4.5 percent in 2021. Although there is a recovery next year, it is not sufficient for GDP to return to pre-crisis levels during the forecast period, debt office said.

The GDP forecast for 2020 was revised from +1 percent and that for 2021 from +1.8 percent projected in February.

The central government debt is projected to increase to SEK 1.556 trillion at the end of 2021 from SEK 1.113 trillion at the end of 2019. As a share of GDP, central government debt rose to 31 percent.

The Maastricht debt is expected to increase to 45 percent at the end of next year from around 35 percent of GDP in 2019.


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EUR/USD and GBP/USD. Merkel and Macron’s $500 billion aid package offer is just an offer. All 27 EU member states must approve

Trading 19 mai 2020 Commentaire »

4-hour timeframe

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Average volatility over the past 5 days: 82p (average).

The EUR/USD pair continues a strong upward movement on Tuesday, May 19, and it worked out towards the end of the day at the resistance level of 1.0952. Today's peak at the time of writing is 1.0976. Recall that in recent weeks we have repeatedly said that the price, in case of an unsuccessful attempt to overcome the lower boundary of the side channel 1.0750–1.0990, will tend to its upper boundary. Last week, traders were not able to overcome the 1.0750 level, and in articles with intraday trading signals, we repeatedly indicated a long-term upward trend line, which also supported buyers of the euro. And today, we can say that the pair worked out the upper boundary of the side channel. Of course, there was no exact trading of 1.0990, the pair may increase to it in the coming hours. Quotes can simply turn down near the upper border of the channel and start moving to the lower border at 1.0750. Therefore, the pair currently remains within the side channel, and the trend movement is absent. Consolidating the price above the area of the level of $1.10 can trigger the formation of a new upward trend.

The calendar of macroeconomic events for the eurozone was empty today. More precisely, several indexes from the ZEW Institute were published, which reflect the mood of investors, the business climate. The European index of economic sentiment significantly increased from -12.1 to 46. The index of sentiment in the business environment of Germany also increased from 32 to 51. Thus, we can assume that the worst for the European economy is already behind. Nevertheless, these are not indicators that could cause a strong reaction of market participants. Pound sterling and the euro have been growing for two days in a row, despite the fact that there were no macroeconomic reports in the UK, the EU or the US on Monday and today they were only in the UK. Of course, various events continue to occur in the world that could theoretically have a positive impact on both pairs. However, it is unlikely that news of successful testing of the coronavirus vaccine in America could cause a sharp increase in the euro and the pound. It would be more logical to expect the dollar's growth, since it turns out that production of the vaccine for the population will begin most quickly in the US, respectively, it will most likely emerge from the epidemic and begin recovery, as well as secure themselves from future new "waves". Therefore, news about vaccine testing is unlikely to be related to the dollar's fall.

Furthermore, German Chancellor Angela Merkel and French President Emmanuel Macron agreed on a package of assistance to the European economy and the countries most affected by the pandemic worth 500 billion euros. It is reported that money will be borrowed in the financial markets. They will go to the EU treasury as a one-time aid to the most affected countries and will not be required to return. It remains unclear who will participate in the formation of this fund. Obviously, these will be France and Germany. But who else will join them? After all, it is unlikely that it will be Italy and Spain, for the sake of which this fund, in particular, is being created. It is also unlikely that only France and Germany will allocate these 500 billion euros. The German Chancellor said that the aid package previously agreed by the European Council is not enough, so the Recovery Fund will be a "German-French contribution to overcoming the crisis caused by the pandemic." Merkel also said that the current crisis is the worst in the history of the European Union. However, it should be noted that so far this is nothing more than a proposal from Paris and Berlin. Earlier, the European Council, for example, could not agree on a assistance package of 2 trillion euros. Even earlier, Berlin and some other northern countries rejected the proposal for crown bonds. Thus, no fund has yet been created, and, for example, Austrian Chancellor Sebastian Kurtz opposes the proposal of Paris and Berlin, believes that this plan will meet resistance from other countries. The adoption of this plan requires the consent of all 27 member countries of the EU, and its discussion will be held in June. Thus, the prospect is not close, and it is not clear how this discussion will end. Based on this, we believe that Merkel and Macron are also not "to blame" for the euro's growth. The reasons are not part of their plan to save the eurozone economy.

4-hour timeframe

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Average volatility over the past 5 days: 123p (high).

The GBP/USD pair also continued its upward movement and crossed the critical Kijun-sen line on May 19. Thus, the downward trend for the pair was temporarily canceled, and now traders can try to start forming an upward trend. In the first half of the article, we tried to figure out what caused the dollar to fall against the euro and the pound. However, no apparent reasons were found. In this part of the article, we will continue to figure this out.

On Sunday and Monday, Federal Reserve Chief Jerome Powell gave an interview twice. However, both times his comments were not of any unexpected nature. On Sunday, Powell noted that US unemployment could rise to 25%, and fall by 20% in GDP in the second quarter. On Monday, the Fed chairman said that the regulator will do everything in his power to save the US economy and prevent it from continuing to fall. Earlier, last week, Powell noted that the stimulus program would be almost limitless, but now there is no talk of lowering the key rate. And Donald Trump even earlier resumed a massive attack on the Fed, again calling for a lower key rate. All this news was unlikely to be a shock to market participants or caused at least some emotions, because the information has long been known. Thus, Powell is unlikely to be involved in what is happening in the first two days. His next speech will take place today, this time in Congress, but it is unlikely that his rhetoric and the rhetoric of Stephen Mnuchin will be very different.

Thus, it turns out that the euro currency most likely grew on the basis of purely technical reasons, or rather, on the rebound from the lower border of the side channel. As for the pound, a correction began after it after a rather long downward movement. Data on unemployment and wages were released in Britain today. The unemployment rate even managed to drop in March, but this is the March data that markets were not particularly interested in. The same applies to wages, the data on them concerned March. But the rate of applications for unemployment benefits, which reached 856,000, concerned April and turned out to be absolutely negative. It should only be noted that the normal value of this indicator is + - 25,000, and it immediately becomes clear how bad everything is. However, today the pound is steadily growing, which again contradicts the nature of macroeconomic information.

Recommendations for EUR/USD:

For short positions:

The EUR/USD pair continued the upward movement on the 4-hour timeframe for most of the day. However, 1.0750–1.0990 can turn around and begin to fall near the upper boundary of the side channel. Thus, we advise you to consider selling the pair with a view to the lower boundary of the channel - 1.0750.

For long positions:

Buy orders can be opened no earlier than breaking the 1.0990 level, the 1.1000 level and the resistance level of 1.1008. After overcoming these obstacles, we can expect an upward trend to form and then you can continue to trade for an increase.

Recommendations for GBP/USD:

For short positions:

The pound/dollar continues to adjust against the downward trend. Thus, traders are advised to resume selling the pair with targets of 1.2070 and 1.1987 in case of price taking below Kijun-sen.

For long positions:

You are advised to consider purchases of the GBP/USD pair while aiming for 1.2325, but in small lots, since there is no Golden Cross.

The material has been provided by InstaForex Company - www.instaforex.com

AUD/USD. China, vaccine, RBA minutes: purchases are still relevant…

Trading 19 mai 2020 Commentaire »

The Australian dollar continues to strengthen against the US currency: after a temporary recession, the aussie moved up again, gaining a foothold within the 65th figure. Disappointing data on the Australian labor market could not change the overall mood for the pair. Traders remain confident that the Australian economy will recover fairly quickly in the second half of the year, and the decline in key indicators will be less deep relative to the Reserve Bank of Australia's forecasts.

Actually, the experts of the RBA themselves admit a similar scenario only if the world is not under the blow of the second wave of the epidemic. Therefore, the general fundamental background for the pair remains positive, especially amid latest news from the front of the fight against COVID-19. News from China also supported the aussie, although relations between Canberra and Beijing have recently cooled down after the Australians supported the idea of the Americans to investigate the possible artificial nature of the coronavirus (which the Chinese did not like). Nevertheless, China is still Australia's key trading partner, so China's economic recovery is pushing the aussie up, not only against the greenback, but throughout the market.

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The closest resistance level for the pair is quite near - at around 0.6590 (the upper line of the Bollinger Bands indicator on the daily chart). But the main price outpost is located a little higher - this, of course, is the "round" mark of 0.6600. When overcoming this target, buyers can expect the pair to return to their usual, pre-crisis price range (0.67-0.69), within which it fluctuated in the second half of last year.

It is noteworthy that traders actually ignored the current macroeconomic reports of Australia, which reflect the negative consequences of the epidemic and lockdown. For example, the latest release of data on the growth of the Australian labor market went almost unnoticed - the aussie formally decreased by several tens of points, after which it quickly recovered. Although the unemployment rate in the country rose to 6.2%, and the growth rate of the number of employed significantly disappointed: it collapsed by almost 600,000. Full employment decreased by almost 230,000, part-time - by more than 370,000. The share of the economically active population fell to 63%. But the market was ready for such a result, so the Australian dollar slightly suffered.

Traders also interpreted the last RBA meeting and its quarterly report in favor of the aussie. And this is despite the fact that the rhetoric of the regulator abounded with pessimistic assessments, forecasts and comments. But market participants have found positive aspects here. Firstly, the RBA stated that it was in a wait-and-see position; secondly, it announced a reduction in the volume and frequency of bond purchases. Although the RBA emphasized in a separate line that the interest rate would not be increased until the key inflation indicators and the level of employment reached their target levels, this fact did not prevent the bulls from moving up. Apparently, market participants are confident that the Australian economy will recover by the end of this year, and by the beginning of next year, the RBA will begin to tighten the terms of monetary policy.

The minutes published today of the last RBA meeting also supported AUD/USD, despite the conflicting rhetoric of the document. Of the negative points, the following can be distinguished. First, according to RBA economists, the country's GDP is expected to decrease by more than 10% in the first half of the year. The main blow of the crisis will be in the second quarter: in particular, unemployment should rise to its peak values, that is, to about 9-10%. Secondly, the RBA expressed its willingness to increase purchases of government bonds, while noting a high level of uncertainty. But at the same time, the RBA members again reiterated the thesis that key economic indicators should recover in the second half of the year, and the pace of this recovery will depend on the duration of the restrictive measures. And it is worth noting that Australia began to gradually quarantine almost immediately after its May meeting - the authorities announced a three-stage strategy, which should return the country to a normal rhythm of life approximately by mid-summer.

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News from China also supports the aussie - last week it became known that China's industry showed growth in April - for the first time since the beginning of the year. And although production volumes in the country increased by only 3.9%, traders responded to the dynamics themselves.

In addition, the Australian dollar is growing due to the common interest of traders in risky currencies. This was facilitated by the news flow from the front of the fight against coronavirus. Recently it became known that in the United States the vaccine first formed a human immunity to COVID-19. Representatives of the biotechnological company Moderna said that their drug has passed positive tests in humans. In turn, scientists at Peking University are testing drugs that are supposed to be able to stop the coronavirus pandemic even without a vaccine. According to the researchers, the drugs can not only shorten the recovery time of the infected, but even provide short-term immunity to COVID-19.

Thus, the fundamental background for the Australian dollar is quite favorable, despite the conflicting rhetoric of the RBA and the decline in current macroeconomic indicators. At the moment, we can consider long positions to the 0.6590 level (the upper line of the Bollinger Bands indicator on the daily chart). The second option is to wait for the downward pullback, again to go buying with the same purpose.

The material has been provided by InstaForex Company - www.instaforex.com

U.S. Housing Starts Plunge 30.2% In April

Trading 19 mai 2020 Commentaire »

Reflecting the impact of the coronavirus-induced economic shutdown, the Commerce Department released a report on Tuesday showing another steep drop in new residential construction in the U.S. in the month of April.

The report said housing starts plummeted by 30.2 percent to an annual rate of 891,000 in April after tumbling by 18.6 percent to a revised 1.276 million in March.

Economists had expected housing stocks to plunge by 23.8 percent to a rate of 927,000 from the 1.216 million originally reported for the previous month.

The Commerce Department said building permits also slumped by 20.8 percent to an annual rate of 1.074 million in April after falling by 5.7 percent to a revised 1.356 million in March.

Building permits, an indicator of future housing demand, had been expected to nosedive by 26.1 percent to a rate of 1 million from the 1.353 million originally reported for the previous month.


The material has been provided by InstaForex Company - www.instaforex.com