Average volatility over the past five days: 70p (average).
The EUR/USD pair began a new round of correctional movement on Friday, May 15. However, the correctional one is only for formality, since there is no trend right now, and therefore movement in the side channel cannot be called corrections. Yes, even though the pair has been stubbornly trading over the last few days of the consolidation channel 1.0750 – 1.1000, the price still cannot leave it. Moreover, in recent days this channel has narrowed to 100 points and now trading takes place in the 1.0774 – 1.0882 range. Thus, we have at our disposal not just a consolidation channel, but an open flat. Today, when macroeconomic data were published only in the EU and the US, the euro/dollar rose in price for the euro and the pound/dollar rose in price for the dollar. Given the fact that macroeconomic data were weak in both the European Union and the United States, it is surprising that there is no correlation between the two main pairs. But this fact allows us to conclude that the macroeconomic background continues to be ignored by market participants. Or traders react very selectively to reports. In the second case, the picture does not become easier, since it is impossible to predict in advance which report will be ignored.
GDP in Germany for the first quarter in a preliminary estimate was released today. According to this report, GDP fell by 2.3% in annual terms, which isn’t a lot. But the fact that the German economy most staunchly opposed the coronavirus was not a secret. Thus, the German economy is likely to suffer the smallest losses among all EU member states. Afterwards, a similar indicator was published in the European Union. Things were worse here than Germany, and GDP declined 3.2% on an annualized basis. However, firstly, these figures are not final, that is, the final values may be worse, and secondly, GDP may continue to slow down in the second quarter, although many countries begin to weaken quarantines. In general, any contraction in the economy is a contraction, which is bad for the currency. However, the euro has been growing against the dollar since the morning, so we conclude that traders have ignored GDP data. In the afternoon, overseas data on retail sales came in, which not only turned out to be bad, but was just completely disappointing. The main indicator of retail sales decreased in April by 16.4% m/m, retail sales excluding automobile sales decreased by 17.2%, and the retail control group lost 15.3%. Market participants were expecting almost half as weak data. Industrial production also lost more than 10% in April, namely 11.2%, but traders were ready for such losses. Immediately after their publication, the European currency accelerated its growth, therefore, it is possible that these reports, and only in the euro / dollar pair, were won back by market participants.
Meanwhile, the news flow from the White House does not stop for a single day. Today we learned that Donald Trump lost five of his acquaintances because of the coronavirus epidemic, two of whom were friends. Trump did not disclose who exactly died from his circle of friends. And on the one hand, this statement can be considered as Trump’s acknowledgement, and on the other hand, the US president can once again mislead Americans and the whole world, as has already been done several times. Recall that a few months ago, YouGov calculated that Trump makes approximately 14.7 false or untrue statements on the day. Everyday. Therefore, the “Trump’s friends” may be ordinary porters in one of his hotels. We do not claim that Trump did not lose anyone, but such a message may be designed to bring the American president closer to the American population, which has already lost more than 80,000 of its fellow citizens.
Average volatility over the past five days: 117p (high).
The GBP/USD pair continued its downward movement on May 15 and it fell to the second support level of 1.2164 by the end of the day. This is the lowest level of April 7 and, most likely, it will be overcome today. If this happens, the pound/dollar pair will leave the side channel and begin forming a new downward trend. Market participants continue to ignore macroeconomic data. For example, today two quite important reports were published in the United States, which turned out to be absolutely disastrous. Nevertheless, it was the US dollar that continued to rise in price on the last trading day of the week. The general fundamental background, it should be noted, does not remain on the side of the British pound, as in the UK a serious economic contraction is expected due to the coronavirus crisis, as well as due to Brexit, due to the lack of trade deals with the European Union and the United States, for Boris Johnson’s reluctance to extend the transition period. Thus, even in conditions when all the economies in the world are experiencing serious problems, the British remains one of the first places on this list. Consequently, the pound coils fall again, to the lows of March 20 – about 1.1411.
Recommendations for EUR/USD:
For short positions:
The EUR/USD pair started a new upward movement and worked out the critical Kijun-sen line on the 4-hour timeframe. Thus, it is recommended to consider selling the euro while aiming for the 1.0780 – 1.0750 range just in case the price rebounds from the Kijun-sen line.
For long positions:
It is recommended to open new long positions in small lots with the aim of the Senkou Span B line, if traders overcome the critical line.
Recommendations for GBP/USD:
For short positions:
The pound/dollar pair continues a rather strong downward movement. Thus, traders are advised to sell the pair with targets 1.2078 and 1.2062.
For long positions:
It is recommended that purchases of the GBP/USD pair be considered with a view to the Senkou Span B line after consolidating quotes above the critical line, but in small lots.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.