Time after time, day after day, we see yet another confirmation that the trend to strengthen the dollar is still maintained. Yes, the dollar sometimes becomes cheaper, but only for a while, after which it again begins to strengthen. And what happened yesterday was just another demonstration of investor sentiment.
In general, the market continues to ignore European data. Even industrial production, the decline of which accelerated from -2.2% to -12.9%, did not make any impression. The market just stood still. Although industrial production in Europe has been declining for seventeen consecutive months. It is possible that the market is already just used to the constant decline in European industry. Although this situation only once again proves that the coronavirus epidemic is not the cause of the unfolding economic crisis. The virus only accelerated its onset.
Industrial Production (Europe):
But everything is somewhat more interesting with US data. If the inflation data published on Tuesday became a kind of confirmation that the United States is slipping into deflation, and this was enough for the dollar to lose its position, then yesterday everything happened a little differently. In fact, lowering producer prices by as much as 1.2% was not new. The market already understands that deflation is inevitable. In fact, producer price data was just one more confirmation of this fact. And this was only enough to temporarily weaken the dollar. Then pretty soon the dollar began to strengthen again. But this should not seem strange, because investors are well aware that the crisis is global in nature, and if everything is bad in the United States, then in other countries it is not better. Moreover, the global economic recovery is likely to begin with the United States. So it’s better to keep money where it’s faster to make a profit.
Producer Price Index (United States):
Today, the focus is on data on applications for unemployment benefits. Of course, you need to consider the general trend towards strengthening the dollar, but do not forget that there are regular spikes in the euro’s growth, which, although they are short-term in nature, are noticeable. And the last two publications of data on applications for unemployment benefits were just accompanied by such jumps. Today’s publication will not be an exception. Of course, the number of initial applications will continue to decline, but still 2,450 thousand initial applications per week – this is a lot. But if the number of initial applications is gradually declining, then the number of repeated applications is only growing, and this time they should be 25,650 thousand. That is, the record set last week will be broken again. Thus, further evidence of a further deterioration in the situation on the labor market, and indeed in the entire economy as a whole, will become a reason for the weakening dollar. But only for today.
Repeated Unemployment Claims (United States):
From the point of view of technical analysis, we see a rapid downward movement when the US trading session is about to begin, during which the quote managed to work out most of the surge of the previous day. In fact, there is a peculiar Zigzag-shaped fluctuation, the length of which is five trading days.
Regarding the working levels, it is worth noting the values: 1.1080, played the role of resistance; 1.0850 focuses on trading interest.
In terms of a general review of the trading chart, the daily period, a global downward trend is fixed, where a stop is visible relative to the monthly period of time at 1.0775/1.1000.
It can be assumed that if the given mood is maintained, the quote will be able to go down to the 1.0775/1.0785 range, where another slowdown with forming a pullback/correction, which happened a period earlier, is not ruled out.
From the point of view of a comprehensive indicator analysis, we see a sell signal relative to hourly and daily periods, which reflects a general interest.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.