Analytics and trading signals for beginners. How to trade EUR/USD on September 4? Getting ready for Friday session

Trading 03 sept 2020 Commentaire »

Hourly chart of the EUR/USD pair

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The EUR/USD pair began to correct on Thursday, September 3 and continued to do so throughout the day. The MACD indicator produced a signal for the correction, which was quite timely. As we expected, the pair needed to correct after almost two days of continuous decline. Trading during the day was extremely calm, and no new sell signals were formed. Thus, at the moment, novice traders can take a rest until the MACD produces a new signal. The trend is currently downward, so we continue to work on sell signals. Unfortunately, it is quite problematic to build a downward trend line or channel, since there are practically no reference points for these patterns at the moment. In general, we continue to consider the option of quotes falling to the 1.1700 level as the working course of action.

There have been quite a large number of data releases of various kinds both in the European Union and America today. For example, the business activity index for the service sector was published in the European Union, which was slightly higher than expected. Also, the EU published a report on changes in retail sales, which was much worse than expected (the decrease was 1.3% compared to the previous month). Meanwhile, the report on the balance of foreign trade was released in the United States, which reached -63.6 billion dollars in July, which means that America sold goods and services worth 63.6 billion less than they purchased. A negative trade balance is considered a negative factor for a country and its currency, but in this case, it is absolutely normal. But the number of new applications for unemployment benefits was 881,000, not 955,000, as expected by traders. The ISM index of business activity in the service sector was 0.1 lower than forecast, which is not critical at all. In general, there was a lot of macroeconomic data, but the markets were not really impressed with any of them. The most important ISM index almost completely coincided with the forecast value and market participants were not impressed either. Therefore, it is quite understandable that it was a quiet trading day.

All of the major events on September 4, Friday are to be expected in the United States. First, the unemployment rate will be released, which, although it began to decline in recent months, still remains at a very high level (10.2% in July). Second, the number of new jobs created outside the agricultural sector will be published, which is the number one report in terms of relevance for determining the state of the labor market. Thirdly, changes in average wages will be released. However, the most important report will of course be the Nonfarm Payrolls (item number 2).

Possible scenarios for September 3:

1) Novice traders are advised to not consider buy positions at this time, since the pair has settled below the upward trend line, so the trend has now changed into a downward trend. There are no signals or technical patterns that currently support the upward trend. Therefore, buyers have to wait for trend lines or channels that would show an upward trend.

2) Sell positions continue to look more relevant, but after a two-day drop in quotes, an upward correction has begun. Thus, novice traders are advised to wait until it ends and can only consider opening new short positions after the MACD indicator has turned down. The closer the MACD indicator turns to zero, the better. A reversal may occur tonight, but we recommend evaluating the situation tomorrow morning.

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 a sharp price reversal.

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

EUR/USD. All attention on Nonfarm Payrolls report

Trading 03 sept 2020 Commentaire »

The euro-dollar pair is in a difficult situation due to the contradictory fundamental background. On the one hand, we have the European Central Bank representatives worried about the high euro exchange rate, on the other hand, the weak dollar, which is still under pressure from the Federal Reserve's latest decisions. In addition, the US macroeconomic data is also showing mixed dynamics: if the ISM manufacturing index came out better than forecasts, the ISM composite index for the non-manufacturing sector disappointed investors. In such conditions, the EUR/USD pair failed to develop a downward momentum, and did not return to its previous positions, in the area of the 19th figure. Traders are stuck at the crossroads, on the middle line of the BB indicator on the daily chart (1.1840). The August Nonfarm Payrolls report is a kind of arbitrator in this situation, which is set to be released at the beginning of the US session on Friday.

What happened?

As mentioned above, the fundamental picture for the euro-dollar pair is quite ambiguous. The US currency fell on all fronts for almost an entire week, after the Fed announced that it has decided to resort to a new strategy of targeting average inflation. Fed Chairman Jerome Powell made it clear that rates will remain at the current level for a long time – much longer relative to earlier forecasts. Now, not only should US inflation approach the two percent level, but also gain a foothold above this target level. Only then will the Fed return to the issue of tightening monetary policy. The Fed will also focus on key data on the labor market. That is why the Nonfarm Payrolls report will play such a big role for the dollar pairs tomorrow.

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But let's talk about the Nonfarm data a little later on, and focus on the problems of the European currency now, which arose quite suddenly. Let me remind you that the latest data on inflation growth in the euro area turned out to be much worse than the forecast values. The recession is serious - Europe has faced deflation for the first time in four years. There are many reasons for this weak inflationary dynamics. In particular, outbreaks of coronavirus were reported in many EU countries in August (first of all, we are talking about Spain, France and Germany).The memory of the spring lockdown is still fresh in people's minds, when economic activity actually stopped in Europe, and the unemployment rate, on the contrary, increased. Therefore, as soon as the first reports of repeated outbreaks of COVID-19 appeared in the press, the consumer activity of Europeans significantly decreased . People began to save more and spend less on non-essential goods.

But the weak growth of European inflation is due to another reason, the high euro rate. The European currency has strengthened against the dollar by a thousand points in recent months. If the pair traded within the 1.08-1.09 price range in the spring, now the price niche is located much higher - in the 1.18-1.20 area. Not only does currency revaluation have a negative impact on inflationary processes, but also on foreign trade - on the export sector. That is why, as soon as the EUR/USD pair touched the 1.20 mark, the ECB immediately became concerned about this fact. In particular, the ECB Chief Economist Philip Lane said that the current euro rate is "unacceptable for the central bank." Traders were alarmed with this rhetoric: rumors spread throughout the market that the central bank would conduct a currency intervention to devalue the single currency. The pair dropped to 1.1790 due to this factor.

However, the pair's bears failed to gain a foothold in the area of the 17th figure. First, most analysts still tend to believe that ECB members will limit themselves to verbal interventions for the time being, reserving more powerful levers of influence for the future. Secondly, the US ISM index in the non-manufacturing sector was published today. Contrary to growth forecasts, it fell to 56 points (from the previous value of 58.1 points). Third, an extremely weak ADP report was released yesterday. According to ADP, only 428,000 jobs were created in August (the forecast was at the level of one and a half million).

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Traders do not risk investing in selling the EUR/USD pair for these reasons. If the key data on the growth of the US labor market comes out worse than projected, the dollar will be under great pressure, and buyers of the pair will be able to return to the area of the 19th figure and possibly test the resistance level of 1.2000. According to preliminary forecasts, the number of people employed in the non-agricultural sector should increase by 1,500,000 people. For comparison: this figure increased by 1,700,000 in July. The unemployment rate should remain within 10 percent. But salaries might disappoint: in both monthly and annual terms, the indicator should demonstrate negative dynamics. In this case, the dollar will react negatively, even if other components enter the green zone. Inflationary indicators are now under special scrutiny, so weak wage growth will hit dollar bulls.

How to trade?

You should take a wait-and-see attitude before the Nonfarm Payrolls report is released. If the data supports the greenback, the pair may fall to the lower line of the BB indicator on the daily chart, that is, to the 1.1730 level and below, to the bottom of the 17th figure. If the Nonfarm Payrolls report disappoints (or at least the wages does), the price may return to the 19th figure. In view of this uncertainty, trading decisions should now be delayed.

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

Treasury Department Announces Details Of Long-Term Securities Auctions

Trading 03 sept 2020 Commentaire »

The Treasury Department revealed the details of this month's auctions of three-year and ten-year notes and thirty-year bonds on Thursday.

The Treasury said it plans to sell $50 billion worth of three-year notes, $35 billion worth of ten-year notes and $23 billion worth of thirty-year bonds.

The results of the three-year note auction will be announced next Tuesday, the results of the ten-year note auction will be announced next Wednesday and the results of the thirty-year bond auction will be announced next Thursday.

Last month, the Treasury sold $48 billion worth of three-year notes, $38 billion worth of ten-year notes and $26 billion worth of thirty-year bonds.

The three-year note auction attracted average demand, while the ten-year note and thirty-year bond auctions attracted below average demand.


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

Brazil Service Sector Contracts Further

Trading 03 sept 2020 Commentaire »

Brazil's service sector activity continued to decline in August, but at a slower pace, due to the severe impact of the coronavirus pandemic, survey data from IHS Markit showed on Friday.

The IHS Markit Brazil Services Business Activity Index climbed to 49.6 from 42.5 in July. A reading below 50 suggests contraction in the sector.

However, the score was the best since February though the period of contraction extended to six months.

Activity declined slightly despite new work increasing for the first time in six months. Job losses continued for the sixth successive month and at a sharp rate.

As firms paid more for personal protective equipment and cleaning products in the battle against Covid-19, cost pressures intensified with input price inflation reaching a five-month high.

The Composite Output Index rose to 53.9 from 47.3 in July, largely led by manufacturing. This was the first expansion in the private sector economy since February and the reading was the highest registered since the start of 2013.


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

U.S. Service Sector Growth Slows Modestly In August

Trading 03 sept 2020 Commentaire »

Service sector activity in the U.S. saw continued growth in the month of August, according to a report released by the Institute for Supply Management on Thursday, although the pace of growth slowed modestly.

The ISM said its services PMI dipped to 56.9 in August from 58.1 in July, but a reading above 50 still indicates growth in the service sector. Economists had expected the index to edge down to 57.0.

The modest decrease by the headline index partly reflected a notably slower pace of growth in new orders, as the new orders index tumbled to 56.8 in August from 67.7 in July. The business activity index also slumped to 62.4 from 67.2.

Meanwhile, the ISM said the employment index jumped to 47.9 in August from 42.1 in July, indicating a modest contraction in employment in the service sector.

The report showed the prices index also surged up to 64.2 in August from 57.6 in July, reaching the highest reading since November of 2018.

"Respondents' comments are mostly optimistic and industry specific about business conditions and the economy as businesses are starting to reopen," said Anthony Nieves, Chair of the ISM Services Business Survey Committee.

"Industries that have not reopened remain concerned about the ongoing uncertainty," he added. "There is a challenge with capacity and logistics due to the pandemic and the impact on deliveries and order fulfillment."

On Tuesday, the ISM released a separate report showing manufacturing activity in the U.S. expanded at a faster rate in the month of August.

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.


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

Dollar Little Changed Following U.S. ISM Services PMI

Trading 03 sept 2020 Commentaire »

Following the release of the U.S. ISM services PMI for August at 10:00 am ET Thursday, the greenback changed little against its major counterparts.

The greenback was trading at 106.32 against the yen, 0.9097 against the franc, 1.3292 against the pound and 1.1849 against the euro around 10:02 am ET.


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

*ISM U.S. Non-Manufacturing Index Drops To 56.9 In August

Trading 03 sept 2020 Commentaire »

ISM U.S. Non-Manufacturing Index Drops To 56.9 In August


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Dollar Retreats Ahead Of U.S. ISM Services PMI

Trading 03 sept 2020 Commentaire »

The U.S. ISM services PMI for August is scheduled for release at 10:00 am ET Thursday.

Ahead of the data, the greenback retreated against its major counterparts.

The greenback was worth 106.35 against the yen, 0.9106 against the franc, 1.3291 against the pound and 1.1839 against the euro as of 9:55 am ET.


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

Spike In U.S. Labor Productivity Upwardly Revised To 10.1% In Q2

Trading 03 sept 2020 Commentaire »

Revised data released by the Labor Department on Thursday showed U.S. labor productivity soared by even more than initially estimated in the second quarter.

The report said labor productivity skyrocketed by 10.1 percent in the second quarter compared to the previously reported 7.3 percent spike. Economists had expected the jump in labor productivity to be upwardly revised to 7.5 percent.

The revised surge in productivity reflects the largest quarterly increase since the first quarter of 1971, when productivity jumped by 12.3 percent.

The upward revision to second quarter productivity, a measure of output per hour, came as output plunged by less than initially estimated.

Output plummeted by 37.1 percent compared to the previously reported 38.9 percent collapse. The nosedive in hours worked was nearly unchanged at 42.9 percent.

The revised spike in productivity in the second quarter came following the 0.3 percent dip in productivity seen in the first quarter.

Meanwhile, the Labor Department said the surge in unit labor costs in the second quarter was downwardly revised to 9.0 percent from the previously reported 12.2 percent. The spike in labor costs was expected to be downwardly revised to 12.1 percent.

The bigger than expected downward revision to unit labor costs primarily reflected the upward revision to labor productivity, as the spike in hourly compensation was little changed at 20.0 percent.

As a result of the downward revision, the jump in unit labor costs in the second quarter was smaller than the 9.6 percent spike in the first quarter.


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

U.S. Trade Deficit Widens To Largest In 12 Years In July

Trading 03 sept 2020 Commentaire »

With imports spiking by more than exports, the Commerce Department released a report on Thursday showing the U.S. trade deficit widened by much more than expected in the month of July.

The Commerce Department said the trade deficit expanded to $63.6 billion in July from a revised $53.5 billion in June. The deficit in July was the widest since reaching $67.0 billion in July of 2008.

Economists had expected the trade deficit to widen to $58.0 billion from the $50.7 billion originally reported for the previous month.

The wider than expected deficit came the value of imports surged up by 10.9 percent to $231.7 billion in July after jumping by 4.6 percent to $208.9 billion in June.

Imports of automotive vehicles, parts and engines showed a substantial increase, while imports of industrial supplies and materials, capital goods and consumer goods also saw notable growth.

Meanwhile, the report said the value of exports jumped by 8.1 percent to $168.1 billion in July after spiking by 9.6 percent to $155.5 billion in June.

Exports of automotive vehicles, parts and engines also saw significant growth along with exports of consumer goods, industrial supplies and materials and capital goods.

"Overall, the data suggest that trade is set to subtract close to 1% annualized from third quarter GDP - slightly bigger than we originally anticipated," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "But we suspect that will be offset by a positive contribution from inventories and in any case, those numbers are small beer compared to our forecast of a 30% annualized rebound in overall GDP."

The Commerce Department noted the goods deficit widened to $80.9 billion in July, while the services surplus narrowed to $17.4 billion.


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