Hungary Q2 GDP Record Fall Unrevised

Trading 01 sept 2020 Commentaire »

Hungary's economy shrank at a record pace in the second quarter, as the coronavirus pandemic hurt activity severely, latest data from the statistical office showed on Tuesday. Gross domestic product decreased an unadjusted 13.6 percent year-on-year after a 2.2 percent growth in the first quarter. The flash estimate was thus confirmed.

The extraordinary situation resulting from the corona virus pandemic had a disadvantageous impact on the performance of most sections of the economy, the statistical office said. On a seasonally and calendar-adjusted basis, GDP fell 13.5 percent year-on-year after a 2 percent growth in the previous quarter. Compared to the previous three months, GDP decreased 14.5 percent in the second quarter after a 0.4 percent fall in the previous quarter. Industrial sector output slumped 20.1 percent year-on-year with a 21.7 percent decline in manufacturing. Construction output decreased 13.2 percent.

Gross value added of?services?decreased 12.2 percent with the biggest falls seen in arts, entertainment and other services and transportation and storage, respectively. Household consumption fell 8.6 percent and investment decreased 13.5 percent. Exports tumbled 24 percent and imports dropped 15.8 percent.


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EUR/USD. Assault on the 20th figure

Trading 01 sept 2020 Commentaire »

The euro-dollar pair last traded in the area of 20 figures more than two years ago – in the early spring of 2018. Therefore, it is not surprising that EUR/USD buyers failed to overcome the psychologically important resistance level of 1.2000 the first time. As soon as the pair entered this price area, it immediately attracted sellers. At the same time, buyers began to take profits en masse, putting additional pressure on the pair. As a result, the EUR/USD bulls were forced to retreat to the bottom of the 19th figure. European inflation also did a disservice to traders (literally and figuratively), which significantly disappointed investors, turning out to be much worse than expected. Nevertheless, the pair still retains the potential for its growth – both from a technical point of view and from the point of view of the foundation, primarily due to the weak positions of the US currency.

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The transition of the US Federal Reserve to targeting average inflation is called a historical event - and it is difficult to disagree with this statement. The resounding speech of Fed Chairman Jerome Powell at the economic symposium is still following the greenback. After all, the new strategy of the US central bank allows the regulator to keep base rates at the current record low level for a longer period of time. Figuratively speaking, the Fed agreed to tolerate inflation at a level above two percent, while not tightening the parameters of monetary policy. Moreover, the 2% level still needs to be reached - with a weak growth in the level of wages, low consumer activity and a high level of unemployment. There is no consensus among experts, but many of them agree that the rate will remain at the current level at least until the end of next year. Such prospects disappointed investors, after which the US currency's appeal noticeably dropped. The dollar index serves as an eloquent illustration of the current situation: the indicator collapsed to 91.81 points, that is, to a two-year low.

Against the background of such a fundamental picture, buyers of EUR/USD were able to emerge within the 20th figure today, reaching a price high of 1.2011. But they retreated almost immediately: firstly, traders did not dare to keep longs at such high positions, and secondly, European inflation, which turned out to be in the red zone was disappointing.

Thus, the overall consumer price index in the eurozone unexpectedly collapsed into negative territory, reaching the level of -0.2%. At the same time, the overall forecast of inflationary growth was at +0.2%. Deflation in the eurozone was recorded for the first time since the spring of 2016. Core consumer price index (core inflation), which more clearly reflects consumer trends (therefore does not take into account volatile goods and basic necessities, such as food, tobacco, and fuel) also sharply slowed from a July reading of 1.2% to 0.4% in August. Analysts expected a slowdown in this component, but to this strong (namely to 0.8%).

In other words, European inflation turned out to be even worse than the weak forecasts. This is a negative signal, but it can be associated with local outbreaks of coronavirus in some European countries (primarily in Spain, France and Germany). The increased risk of repeated lockdown forced Europeans to spend less and save more for a rainy day. These trends were reflected in the August CPI figures.

Considering today's release, we can assume that the downward correction of EUR/USD will continue: buyers, as they say, have room to fall. The nearest support level is not located at the round mark of 1.1900, but at 1.1840 - this is the middle line of the BB indicator on the daily chart, which coincides with the Kijun-sen line.

And yet, in my opinion, the pair will not go below the aforementioned target in the medium term. Traders are rightly concerned about the dynamics of European inflation, so today's correction looks quite logical. But at the same time, take note that the European Central Bank, unlike the Fed, did not change the inflation guidelines - this fact gives the euro an advantage over the dollar due to the long-term guidelines of the central bank.

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In addition, the dollar is still under an array of its own problems, including political ones. For example, US Treasury Secretary Stephen Mnuchin just accused Democratic lawmakers of unwillingness to "negotiate in good faith." Let me remind you that the representatives of the White House and representatives of the Democratic Party in Congress have not reached a compromise on the new stimulus package. Democrats in the House of Representatives approved more than $3 trillion for this purpose back in May, while the Republicans controlling the Senate presented a $1 trillion stimulus package. Democrats are blocking the adoption of the bill in the Lower House of Congress, while Republicans are blocking it in the Upper House. And here it is worth noting that Mnuchin has expressed optimism about the prospects for the negotiation process over the past months. Therefore, his recent pessimism surprised many - this means that the dialogue between political opponents has finally reached a dead end.

Thus, at the moment, the EUR/USD bears can only afford a correction, since the fundamental problems of the dollar have not gone anywhere. Traders today simply did not take the risk of maintaining long positions amid slowing European inflation. The current price downturn can be used as a reason to open longs towards the main growth target in the medium term - the 1.2000 level. Moreover, we must not forget that August Nonfarm Payrolls data will be published on Friday, which may be in the red zone, given the increase in the number of initial applications for unemployment benefits.

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

U.S. Construction Spending Inches Up Less Than Expected In July

Trading 01 sept 2020 Commentaire »

Construction spending in the U.S. saw a modest increase in the month of July, according to a report released by the Commerce Department on Tuesday.

The report said construction spending inched up by 0.1 percent to an annual rate of $1.365 trillion in July after falling by 0.5 percent to a revised rate of $1.363 trillion in June.

Economists had expected construction spending to jump by 1.0 percent compared to the 0.7 percent drop originally reported for the previous month.

The uptick in construction spending came as spending on private construction climbed 0.6 percent to an annual rate of $1.014 trillion.

Spending on residential construction spiked 2.1 percent to a rate of $546.6 billion, while spending on non-residential construction slumped by 1.0 percent to a rate of $466.9 billion.

Meanwhile, the report said spending on public construction tumbled by 1.3 percent to an annual rate of $351.1 billion.

Spending on educational construction plunged by 3.0 percent to a rate of $82.2 billion, while spending on highway construction plummeted by 3.1 percent to a rate of $99.0 billion.


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U.S. Manufacturing Activity Expands At Faster Rate In August

Trading 01 sept 2020 Commentaire »

Manufacturing activity in the U.S. expanded at a faster rate in the month of August, the Institute for Supply Management revealed in a report on Tuesday.

The ISM said its purchasing managers index rose to 56.0 in August from 54.2 in July, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to inch up to 54.5.

"After the coronavirus (COVID-19) brought manufacturing activity to historic lows, the sector continued its recovery in August, the first full month of operations after supply chains restarted and adjustments were made for employees to return to work," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, "Demand and consumption continued to drive expansion growth, with inputs representing near- and moderate-term supply chain difficulties."

The bigger than expected increase by the headline index came as the new orders index jumped to 67.6 in August from 61.5 in July.

The production index also increased to 63.3 in August from 62.1 in July, while the employment index climbed to 46.4 from 44.3 but still indicates a contraction.

On the inflation front, the prices index surged up to 59.5 in August from 53.2 in July, indicating an acceleration in the pace of price growth.

Fiore noted many panelists' companies are holding off on capital investments for the rest of 2020 due to the current economic environment.

The ISM is scheduled to release a separate report on activity in the service sector on Thursday. The non-manufacturing index is expected to edge down to 57.0 in August from 58.1 in July.


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Dutch Manufacturing Sector Expands In August

Trading 01 sept 2020 Commentaire »

The Dutch manufacturing sector expanded in August, survey results from IHS Markit showed on Tuesday.

The NEVI manufacturing Purchasing Managers' Index, or PMI, rose to 52.3 in August from 47.9 in July. Any reading above 50 indicates expansion in the sector.

New orders and production rebounded in August. Output and order book volumes grew for the first time since February, with the rate of expansion sharpest since January and December last year.

Employment level decreased in August, with the rate of job shedding softest since March. Backlogs of work fell for the fifth month in a row.

Purchasing activity increased in August, with the rate quickest since December 2018. Pre- and post- inventories declined solidly and delivery time lengthened.

Cost burden rose for the first time since March and average selling prices increased.

Optimism regarding the next 12-months outlook for output improved in August, with future output index rising to its highest for six months.

"A large number of the manufacturers anticipate a negative long-term impact on their companies' activities and turnover as a result of the corona crisis," David Kemps, manufacturing sector specialist at ABN AMRO, said.

"The expectation is that many of the company reorganizations that have already started will lead to an increase in unemployment, lower output & investment and fewer innovations later on in the year," Kemps added.


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Analytics and trading signals for beginners. How to trade EUR/USD on September 2. Analysis of Tuesday trades. Getting ready

Trading 01 sept 2020 Commentaire »

EUR/USD hourly chart

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On Tuesday, September 1, the EUR/USD pair has finally reversed to the downside and settled below the upward trend line. However, as we have mentioned earlier, the uptrend line had a very strong decline. Therefore, almost any correction would lead to consolidation of the quotes below this line. This is exactly what happened today. First, the MACD indicator turned downward, giving a signal to all buyers to close long positions. Then, the price passed the trend line, so it was possible to open short positions. Even though the pair is going through a correction, it can still move down by a certain number of pips. The price passed the ascending trend line just as the downward movement started, and not when it ended. In this case it would be too late to open sell positions. Thus, we think that beginners had the right moment to open sell positions today, since the signal was quite obvious. In the morning, we set the downward target at the level of 1.1891. We believe that the price can reach this target today or tomorrow. Thus, if you opened the trades at the cross point with the trend line, you can leave them open until the morning by placing Stop Loss.

There were a lot of macroeconomic events on Tuesday. However, as we warned yesterday evening and this morning, only the US ISM Manufacturing PMI influenced the pair's trajectory. The data exceeded the forecasts and amounted to 56 points. Apart from this index, it is worth mentioning the drop in the EU inflation rate in August. According to preliminary estimates, it is seen to decline to -0.2% year-on-year. This actually indicates deflation - a fall in prices - rather than inflation. It is believed that controlled inflation within 2-3% spurs the economic growth. Therefore, deflation is a very dangerous phenomenon for countries with developed economies. This is definitely bad news for the EU and the euro. That could be the reason of the weakening euro on Tuesday, as the estimated and the released readings differ sharply.

On Wednesday, September 2, no key economic statistics are expected. We can advise novice traders to focus their attention on the ADP report on the change in total private employment data. This report and the NonFarm Payrolls, the number of new jobs created outside the agricultural sector, are believed to represent the real state of the labor market. And a stable labor market is one of the most important conditions for economic growth. In case with the US, it will reveal the pace of economic recovery from the pandemic. Thus, a reading higher than 950,000 could trigger more buy positions on the US currency. Other economic reports are unlikely to cause any serious fluctuations in the market.

Possible scenarios for September 2

1) We do not recommend that beginners place buy positions on the pair at this time, since the pair has already consolidated below the uptrend line. So, the trend has now reversed to the downside. In the near future, the pair may still resume its uptrend, and the ascending line will change its position to a less steep decline. Thus, those who want to open buy deals should closely monitor the price movements.

2) Sell position look more relevant now. But as we mentioned above, the overall weak demand for the US currency and the possible resumption of the uptrend with a change in the trend line may cancel the downtrend movement. In any case, novice traders can leave their short positions open for now with the target at 1.1891. Once the MACD indicator turns upwards, you can close short deals.

On the chart:

Support and Resistance Levels are the Levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.

Red lines are the channels or trend lines that display the current trend and show in which direction it is better to trade now.

Up/down arrows show where you should sell or buy after reaching or breaking through particular levels.

The MACD indicator consists of a histogram and a signal line. When they cross, this is a signal to enter the market. It is recommended to use this indicator in combination with trend lines (channels and trend lines).

Important announcements and economic reports that you can always find in the news calendar can seriously influence the trajectory of a currency pair. Therefore, at the time of their release, we recommended trading as carefully as possible or exit the market in order to avoid sharp price fluctuations.

Beginners on Forex should remember that not every single trade has to be profitable. The development of a clear strategy and money management are the key to success in trading over a long period of time.

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

Poland Manufacturing Sector Expansion Slows In August

Trading 01 sept 2020 Commentaire »

Poland's manufacturing sector rose at a slower pace in August, survey data from IHS Markit showed on Tuesday.

The manufacturing Purchasing Managers' Index, or PMI, fell to 50.6 in August from 52.8 in July.

Economists had forecast a score of 52.9. Any reading above 50 indicates expansion in the sector.

Volume of new orders remained unchanged in August and manufacturers expanded production further. Output grew for the second time since October 2018.

Backlogs of work fell at a sharper rate in August, albeit at a slower rate. Stocks of purchases declined for the fourteenth straight month and inventories of finished goods declined for the second straight month.

The employment shed in August, extending to fourteen months.

Input price inflation accelerated to the highest in six months in August and pressure on profitability rose ad output prices were reduced for the fifth straight month.

"Manufacturers remained confidence of growth of production over the next 12 months, but sentiment was weaker than in July, mainly reflecting concerns over a potential second wave of COVID-19 and any re-tightening of restrictions," Trevor Balchin, Economics Director at IHS Markit, said.


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Portugal Industrial Production Decline Slows In July

Trading 01 sept 2020 Commentaire »

Portugal's industrial production declined at a softer rate in July, figures from Statistics Portugal showed on Tuesday.

Industrial production fell 9.6 percent year-on-year in July, following a 14.6 percent decrease in June. Output fell for the fifth month in a row.

Manufacturing output declined 9.1 percent on a yearly basis in July, following a 15.7 percent drop in the previous month.

Energy output declined 11.3 percent annually in July. Production of intermediate and investment goods decreased by 9.6 percent and 14.4 percent, respectively.

On a monthly basis, industrial production rose 11.9 percent in July, following an 11.0 percent growth in the preceding month.


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Hong Kong Retail Sales Fall Further In July

Trading 01 sept 2020 Commentaire »

Hong Kong's retail sales declined further in July, albeit at a softer rate, figures from the Census and Statistics Department showed on Tuesday.

The retail sales volume declined 23.9 percent year-on-year in July, following a 25.3 percent decrease in June.

The value of retail sales decreased 23.1 percent annually in July, following a 24.7 percent fall in the preceding month.

Sales value of jewelry, watches and clocks, and valuable gifts declined 53.7 percent annually in July. Sales of clothing, footwear and allied products fell by 44.1 percent and those of other consumer goods decreased 32.2 percent.

"The year-on-year decline in retail sales remained notable in July despite a lower base of comparison, as the surge of local COVID-19 cases and the resultant tightening of social distancing measures in that month further disrupted consumption activities," a government spokesman said.

The spokesman says that, "while the recent stabilization in the local epidemic situation may help improve consumption sentiment, the business environment of the retail trade will continue to be very difficult in the near term as inbound tourism remains at a standstill."


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UK Manufacturing PMI At 30-Month High

Trading 01 sept 2020 Commentaire »

The UK manufacturing sector expanded at the fastest pace in two-and-a-half years in August as companies restarted operations following coronavirus disease 2019 lockdowns, final data from IHS Markit showed Tuesday.

The IHS Markit/Chartered Institute of Procurement & Supply manufacturing Purchasing Managers' Index rose to a 30-month high of 55.2 in August from 53.3 in July. But this was slightly below the flash estimate of 55.3.

Manufacturing output expanded at the fastest rate for over six years in August. New order intakes also strengthened, whereas the trend in employment remained weak with job losses recorded for the seventh straight month.

Business sentiment regarding future output prospects remained positive in August, staying close to July's 28-month high.

Given the fragility of demand and uncertain outlook, both in terms of COVID-19 and Brexit, policymakers may struggle to prevent a 'surge-then-slump' scenario from developing, Rob Dobson, Director at IHS Markit, said.


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