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The new trading week promises to be quite boring in macroeconomic terms. News and reports will be, however, their degree of significance and quantity will not be comparable to the previous week. And since economic data will be, if not secondary, then not the most significant for sure, and market participants still ignore 95% of all incoming information, then, most likely, next week we will not see any correlation between the fundamental background and movement of the euro/dollar pair. Really important data are expected only on Friday. Thus, technical factors will continue to remain in first place, to which it is advised to pay increased attention when performing any trading actions. Last week ended with an upward movement, still baseless from a fundamental point of view. Thus, at least a correction is expected on Monday-Tuesday.
The European Union will publish indices of business activity in the manufacturing sector on Monday. These figures have not surprised anyone for a long time. In Germany, it is expected to fall to 34.4 points in April, and to 33.6 in the EU as a whole. Only a secondary report is planned in the US – production orders for March, which are at risk of falling by 9.5% m/m.
I would like to note at once that macroeconomic statistics do not have a strong impact on the pair, because the fall of the EU and US economies occurs synchronously and simultaneously. In other words, it's not that one economy is falling down, but the other is just feeling stable. And since both economies are contracting, neither currency has an advantage. As we found out last week, the US economy contracted by a higher value (-4.8% of GDP). Thus, we can expect the US dollar to face pressure in the following weeks. However, this pressure is unlikely to be long-term. We would like to note that after three months of highly volatile trading, one month of which was frankly panic-stricken, the quotes of the pair returned to their original positions - the positions that were traded at the end of January.
No important statistics on the European Union are set for Tuesday. Data on business activity in the EU services sector in April will be published, and these figures threaten might be miserable. However, this is not surprising, since the service sector has suffered a lot from the quarantine measures. The volume of retail sales for the month of March will also be published, which is expected to decrease by 10% in annual terms and 12% in monthly terms. Needless to say, there were no such reductions in terms of volume, if not ever, then during the period of statistics collection – for sure (and this is at least 25 years). Again, these figures are unlikely to surprise market participants. As well as in the US, retail sales also sharply plunged.
On Thursday, Germany will publish an indicator of industrial production in March. According to experts, the indicator will fall by 7% on a monthly basis. No economic data is expected from the European Union on Friday. We would also like to note that all the most important data will be received again from overseas and will be discussed in the next article on GBP/USD.
What can be said as a result? We believe that all macroeconomic statistics from the eurozone will not cause any reaction from traders. Therefore, statistics will be the only thing that matters when the crisis, quarantine and epidemic are over. Unfortunately, despite the fact that coronavirus is a treatable disease, there is still no vaccine against it, people continue to get sick, and governments can only mitigate quarantine measures at the risk of new outbreaks of the epidemic. Because if this is not done, then there will be nothing to restore in six months or a year. Thus, in fact, the theme of the issue now is precisely the COVID-2019 virus pandemic. The world will not be able to return to normal life until an effective medicine or vaccine is found, and the economy will function at best in a limited mode.
Almost 3.5 million cases of coronavirus were recorded in the world on Sunday morning, May 3. More than a million people recovered, almost 250,000 fatal outcomes. However, the fact that people are recovering from a disease cannot be positive for the economy. The problem is that the treatment takes around two weeks to a month or more. Thus, any person who becomes infected, firstly, can infect a huge number of other people, even if he suffers from the disease in a mild form, and secondly, all patients will not be able to work for at least a month. Thus, the removal of quarantine measures can lead to a second wave of infection, which will lead to new quarantines and new pauses in the work of the entire world economy.
However, in the most infected Italy, quarantines begin to weaken from May 4. The industry and construction sector will resume work on this day. However, only vital enterprises and industries will be able to leave quarantine. For example, schools will open no earlier than September, so as not to risk the lives of children. In Germany, the situation with the coronavirus is one of the most favorable in Europe. Of the 167,000 patients, about 123,000 recovered, about 6.5 thousand people died. This is one of the lowest mortality rates in the world. Schools, museums, exhibition centers, galleries, various gardens and memorials will open in May (exact dates are still unknown). However, holding public events will be prohibited at least until the fall. Angela Merkel only opposes the opening of restaurants and cafes, considering the catering places to be the most dangerous. "We cannot check whether people at the table belong to the same family or they are from different households," said the German Chancellor. "We have no medicine, we have no vaccine against the virus, and therefore, the goal is to slow the spread of the virus," Merkel concluded. In Spain, which also suffered greatly from the pandemic, some quarantine prohibitions are also lifted. After a seven-week ban on people, people are allowed to go for walks and go in for sports from the second of May. The number of deaths from the coronavirus has been falling steadily for several weeks. The most difficult situation remains in the United States, where the coronavirus continues to spread rapidly, but Donald Trump is eager to restart the economy. The state of Texas has already resumed its work and will act in some way as an "experimental rabbit." If the number of infected people does not increase in this state, then another quarantine measure will be lifted starting on May 18. At the same time, the states of California and New York are toughening quarantine measures.
The technical picture of the EUR/USD pair shows that the upward movement could end near the 1.0985 level. At least there is no panic in the foreign exchange market now, which means that the price is unlikely to go 100 points one way without a single correction. Therefore, we have the right to expect a corrective movement on Monday. I will clarify the goals of the Ichimoku framework on the same day.
Trading recommendations for the EUR/USD pair:
We believe that the influence of the fundamental background could be present next week, and the most important data will come from America. There may be low volatility of the euro/dollar pair and a corrective mood of traders on Monday and Tuesday. Turning the MACD indicator down will signal a round of downward correction.
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