EUR/USD. Flat before the storm

Trading 28 avr 2020 Donner votre avis

The euro-dollar continues to trade within the eighth figure, although the EUR/USD bulls do not give up attempts to gain a foothold above the resistance level of 1.0850. The pair showed a bullish mood in the morning, but price fluctuations were still limited by the stop-point frames of the flat band. Figuratively speaking, EUR/USD traders are between a rock and a hard place - a decline in anti-risk sentiment puts pressure on the dollar, while the European Central Bank's dovish intentions hinder the growth of the single currency. And the Federal Reserve can surprise the market with its attitude - therefore, market participants are in no hurry to open large positions.

In other words, there is no clear winner within the framework of the intraday struggle - buyers almost immediately retreat after an uncertain assault. Downward momentum also faded quickly enough - negative macroeconomic reports in the US are no longer able to provoke outbursts of anti-risk sentiment, but nevertheless put pressure on the US currency. At the same time, the slowdown in the spread of the epidemic and the gradual weakening of restrictive measures indirectly support risky assets, including the euro. In addition, Russia and South Korea have denied information about the death of North Korean leader Kim Jong-un, although the head of the DPRK himself has not appeared in public (there is a version that he is hiding from the coronavirus).

But let's start with US statistics. Macroeconomic reports continue to reflect the detrimental effects of the coronavirus epidemic. The April indicator of consumer confidence reached 86.9 points - this is the weakest growth rate since 2014. The indicator has been declining for the second consecutive month: if it reached its six-month peak of 132 points in February, then it dropped to 118 points in March, and in April - to 86 with a forecast decline to 89. But the Fed-Richmond manufacturing index significantly disappointed - it broke a historical record and collapsed by 53 points, being much lower than forecasted values. And although this is a rather secondary indicator, it added to the negative fundamental picture for the dollar. In addition, dollar bulls are anticipating tomorrow's data on US GDP growth in the first quarter. According to the consensus forecast, the indicator will collapse to -3.9% and will break many years of anti-record. The price index of GDP should also show a negative trend, dropping to 1% (the lowest growth rate since the first quarter of 2016).

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The situation regarding the spread of coronavirus also provides background support for the bulls of the EUR/USD pair. First of all, the situation is improving in Europe - in particular, in Italy and Spain, which suffered the most from the epidemic, a record number of patients have recovered in recent days. In general, more than 923,000 people have already been cured in the world, and most countries are gradually weakening quarantine. For example, construction in Italy will resume next week and the industry will start. The situation is still difficult in the United States, but Trump remains optimistic - according to him, the pace of distribution of COVID-19 has slowed in the country. This fact did not support the dollar, but at the same time supported the euro, as anti-risk sentiment declined in the market.

However, not everything is so smooth for the European currency. Traders clearly do not risk investing in euros in anticipation of the April meeting of the ECB, which will be held on Thursday. It is necessary to recall here that investors were disappointed by the results of the last online summit of the leaders of the EU countries. On the one hand, the heads of state approved a program of assistance worth 540 billion euros. But on the other hand, they could not agree on a large-scale and long-term plan for restoring the eurozone economy, the amount of assistance under which could reach from one to one and a half trillion euros. European leaders postponed this question "in the long run", instructing the European Commission to work out the details of the economic recovery plan for the next meeting of the Eurogroup, which will be held in May. The head of the European Central Bank Christine Lagarde voiced a rather pessimistic rhetoric, the essence of which boils down to the fact that Europe is "too slow and insufficient" to respond to the challenges of the epidemic.

According to a number of experts, the indecision of EU leaders, as well as disagreements between representatives of the south and north of Europe, could push members of the ECB to more decisive action. In particular, rumors are circulating in the market that ECB members may increase their bond purchase program to a trillion euros at the April meeting. According to other analysts, the European regulator will only announce such intentions, but will begin to act in June (when updated forecasts will be published) or in July (when the fate of the above plan to restore the eurozone economy will be clear). Such rumors put significant background pressure on the euro, offsetting all the conquests of the EUR/USD bulls.

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Thus, the current flat for the euro-dollar pair is quite justified - bulls and bears have significant arguments for an intraday struggle. As a result, the pair closes the trading day at almost the same positions where it started. But do not expect that such a sluggish flat will last until the end of the week - tomorrow, even before the announcement of the results of the Fed and Jerome Powell's press conference, EUR/USD will enter the price turbulence zone - after the release of data on the growth of the US economy. If the report turns out to be worse than the pessimistic forecast, the dollar will come under strong pressure and the pair could test the ninth figure again (the goal of the upward correction is the Kijun-sen line on the daily chart and the 1.0920 level). Otherwise, the pair will go to the support level of 1.0750 (the lower line of the Bollinger Bands indicator on the same timeframe).

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

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