Average volatility over the past five days: 80p (average).
Following a slight correction, the EUR/USD pair resumed the upward movement within the framework of the side channel, limited by the levels of 1.0750 and 1.0990 on Wednesday, May 20. Thus, as we expected this morning, the pair will try to clearly work out the upper border of the channel and it will decide the future of the euro currency in the coming days and weeks. With a high degree of probability, a rebound will occur from the $1.10 level, which will leave the pair inside the side channel. In this case, a new round of downward movement will begin with the target of 1.0750. However, in case of overcoming the upper boundary of the side channel, the continuation of the upward movement is expected. From a fundamental point of view, it is difficult to say something specific now. On the one hand, there is a proposal to create a Recovery Fund in Europe, from which they want to help the countries and segments of the economy that are most affected by the coronavirus. On the other hand, this is not a reason for joy and purchases of the European currency. Earlier, ideas about crown bonds and a 2-trillion stimulus package failed miserably. Thus, 500 billion, firstly, is not enough, and secondly, they still need to be collected, and before that it is necessary that all 27 EU member states approve this plan of Angela Merkel and Emmanuel Macron. Thus, we do not believe that the euro/dollar is growing due to these events.
As for ordinary macroeconomic statistics, everything here is also ambiguous. Market participants simply continue to ignore almost all the data at their disposal. For example, the consumer price index in the European Union for April was published today. The inflation value turned out to be worse than the already weak forecast and reached only 0.3% in annual terms. Compared to March 2020, prices in the eurozone fell by 0.2%, that is, this is a deflation. Minutes of the last meeting of the US Federal Reserve is set to be released in the evening, however, as we already said in previous articles, this document is unlikely to contain information still unknown to the markets.
Meanwhile, the most interesting information comes from the US again. Joe Biden calls the US president “President Tweety,” alluding to Trump’s daily posts on Twitter. Donald Trump once again called the “crazy” House Speaker Nancy Pelosi, simultaneously accusing all Democrats of corruption and the desire to remove him from power by illegal means. “There was not so much abuse against anyone as against me. The top of the FBI is corrupt and bad people. “Russian business” is a concocted, fabricated story. Democrats are sick. Nancy Pelosi is a sick woman, she has problems with her head,” the US leader said. Once again, we would like to note that Trump, although he is a strong leader, is sorely lacking in flexibility and the ability to work in a team with opposition political forces, taking into account the interests of all. That is why he regularly falls under the wrath of the Democrats, who, indeed, are ready for anything, just to prevent Trump from being re-elected. Moreover, if a year ago everything was relatively good in America, and the trade war with China, although it entailed a slight reduction in the economy, nevertheless ended with the signing of a trade agreement (albeit not complete), now this deal threatens to be terminated and Beijing and Washington are preparing for a new trade war. And what successes in the presidential field can Donald Trump now boast of, daily insulting everyone and everything? Trump is to blame for everything, China, the World Health Organization, the Democrats. After that, he wonders why everyone is so unfavorable to him and fervently wants him to leave his post? Well, the situation with the coronavirus is just a cherry on the cake. Wherever COVID-19 infection came from, the United States was not prepared for an epidemic. Authorities should be blamed for this and not the WHO.
Average volatility over the past five days: 117p (high).
The GBP/USD pair is trading almost identically to the EUR/USD pair on May 20. The upward movement also resumed for the pound/dollar pair, although there were no strong macroeconomic reasons for this. The Ichimoku indicator has formed a new signal to buy the Golden Cross, which allows us to expect a new upward trend to form. However, the Ichimoku cloud with a strong Senkou Span B line lies on the way up. Therefore, the current upward movement continues to be identified as corrective for now, despite overcoming the critical Kijun-sen line. Volatility for the pair is extremely low today, at the time of writing, only 67 points.
The UK consumer price index for April was published today. As in the case of the European Union, inflation slowed down, but not so much, and reached 0.8% in annual terms. However, we have already noted that under current conditions, the inflation rate is not important. Inflation is a significant indicator when it comes to economic growth. The central bank is oriented to stimulate economic growth due to inflation. However, now all the economies of the world are simultaneously reducing, so it does not matter what inflation rate is fixed. Traders, as we see, hold the same opinion, because the next slowdown in the consumer price index did not cause any reaction. The British pound continued to rise moderately against the dollar. Bank of England Governor Andrew Bailey is set to make a speech today. However, we believe that he will not inform the markets of anything fundamentally new. The only thing that market participants expect from the central bank in the near future is the expansion of the quantitative incentive program by 100 or 200 billion pounds. Thus, in general, we can say that the fundamental background was absent for the pound/dollar pair today, and the macroeconomic one was again ignored. Technical factors are in first place, which we recommend paying special attention to when opening any positions and predicting the further movement of the pair.
Recommendations for EUR/USD:
For short positions:
The EUR/USD pair continues its upward movement on the 4-hour timeframe. However, it can turn around and begin to fall near the upper boundary of the lateral channel 1.0750 – 1.0990. Thus, we recommend considering selling the pair with a view to the lower boundary of the channel – 1.0750 in the case of an eloquent rebound in the price from the level of $1.10.
For long positions:
Buy orders can be opened no earlier than breaking 1.0990, the 1.1000 level and the resistance level of 1.1008. After overcoming these obstacles, we can expect an upward trend to form and continue trading 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 the objectives of 1.2130 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 the 1.2325 level, but in small lots, since the Golden Cross is weak.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.