EUR/USD. Saturated Thursday: conflicting data, gloomy ECB and surprise from the Fed

Trading 01 mai 2020 Donner votre avis

Again, it depends on the angle at which you look at the published data. We believe that it could have been much worse, so we consider it relatively optimistic, or at least not a failure.

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The main macroeconomic indicators of the eurozone were published in the morning - data on inflation growth, GDP and unemployment. The key EU countries, in particular Germany, Spain and Italy, also announced their macro-indicators. To the dismay of the EUR/USD bulls, the published releases did not support the euro. However, some indicators came out surprisingly better than predicted, not making it possible for the bears to develop a downward movement.

Let's start with the bad news. First of all, German indicators disappointed - the unemployment rate jumped to 5.8% (with a forecast of growth of 5.1%), and the number of unemployed rose to 373,000 (for comparison: this indicator ranged from -10 to +10 on average thousand). French and Spanish indicators were disappointing - France's GDP fell in the first quarter by 5.8% (quarterly) and 5.4% (year on year). The level of consumer spending by the French broke a historical record, plunging to the level of -17.9% (experts expected a decrease to -5.7%). Spain's economy also slowed down to -5.2% (q/q) and -4.1% (y/y). Spanish inflation, which likewise ended up in the red zone, was also disappointing. However, the eurozone consumer price index unexpectedly entered the green zone, not justifying the pessimistic forecasts of most analysts. Thus, the general index fell to 0.4% (with a forecast of decline to 0.1%), and the core inflation index - to 0.9% (with a forecast of decline to 0.7%). Italian inflation was also encouraging - the indicators were better than expected, although in annual terms the CPI dropped to zero. Eurozone GDP growth data for the first quarter turned out to be slightly worse than forecasts. When forecasting a decline to -3.7% q/q and -3.1% y/y, the indicators reached the levels of -3.8% q/q and -3.3% y/y.

Such contradictory results could not help either the bears or the bulls, so the pair could not leave the eighth figure area - traders decided to wait for the outcome of the ECB April meeting. However, the results of the meeting also failed to move the situation off the ground: the European regulator expectedly left the parameters of monetary policy unchanged, and the text of the accompanying statement did not differ much from the March one. There is one innovation: the ECB has launched a new long-term lending program for eurozone banks and relaxed TLTRO conditions (lowering the interest rate on long-term lending operations of TLTRO III), warning of its readiness to increase the scale of the pandemic emergency purchase program announced in March (by currently - 750 billion euros.). However, similar intentions were previously voiced by representatives of the ECB, so traders only formally reacted to this news, by plunging to the 1.0850 level.

During her press conference, ECB President Christine Lagarde put additional pressure on the European currency. Her rhetoric was similar to that of Fed Chairman Jerome Powell, but it was not about the American, but about the European economy. Lagarde predicted the eurozone economy's "unprecedented decline" due to coronavirus. At the same time, she repeated her forecast, which was voiced at the last summit of the leaders of the EU countries - according to preliminary estimates of central bank economists, eurozone GDP could fall by 5-12% this year. During the summit, she slightly exaggerated this forecast, indicating a possible decrease of 15%. Lagarde clarified that the depth of the recession will depend on the duration of the lockdowns that operate in the eurozone countries.

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Thus, the results of the April meeting of the ECB and the subsequent rhetoric of Lagarde were not in favor of the European currency, and so the pair updated the daily low, falling to 1.0833. But subsequent events destroyed bearish plans - the US session could not do without unpleasant surprises for EUR/USD sellers.

Firstly, the most favorite inflation indicator of the Federal Reserve - the RFE - showed rather weak growth, thereby reinforcing concerns about the growth of US inflation in general. Secondly, the indicator of the level of expenditures of the population turned out to be much lower than the forecasted values - it slumped to -7.5% (long-term anti-record) with a forecast of decline to -4.8%. The Chicago PMI business activity index also disappointed - it similarly updated the anti-record, finding itself at 35 points. In addition, labor market data again appeared in the red zone - the number of applications for unemployment benefits rose over the past week to 3.8 million (while experts expected a continuation of the downward trend).

The dollar was under pressure following the above releases, and eventually it collapsed throughout the market at the end of the trading day - but not because of macroeconomic reports. The fact is that the Fed unexpectedly (the day after the April meeting) announced the expansion of the lending program for small and medium-sized businesses. The program itself was announced three weeks ago, but changes have been made to it only now - "after receiving feedback from more than two thousand companies and individuals." Firstly, the regulator reduced the minimum amount for loans of certain categories from 1 million to 500 thousand dollars, secondly, increased the list of companies that can receive loans under this program, and thirdly, created a new option with an increase in the share of risk from lenders for borrowers with a higher ratio of own and borrowed funds.

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The effect of surprise (and the fact of expanding the program itself) played against the US currency - the greenback flew a stone down the entire market, and the dollar index tested the 98th figure (although it was already on the boundaries of the hundredth figure in the morning). The EUR/USD pair jumped to the resistance level of 1.0970 (the upper line of the Bollinger Bands indicator on the daily chart). As a rule, after such impulsive jumps, correctional pullbacks will follow. In this case, it is necessary to follow the 1.0930 mark (Kijun-sen line on the same timeframe) - if buyers can keep the price above this target, the bulls will test 1.0970 again with an eye on the 10th figure. That is, if the price stays above 1.0930 on Friday, we can consider long positions to the lower and upper boundaries of the Kumo cloud, which correspond to the marks of 1.1000 and 1.1060. If the pair returns to 1.0850, the bullish scenario will lose its relevance.

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

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