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During the first half of the trading week, the US dollar was under a flurry of sellers, as a result, the dollar index (DXY) dropped from March 9 to 11 to 91.36, which is the level of March 4. On the last day of the outgoing week, the dollar returned to the path of purchases, as a result, the DXY bounced off the minimum by more than 550 points, recouping a 50% decline in the previous period.
Note that the Dollar Index (DXY) is the ratio of the US dollar (USD) to a basket of six currencies and is a weighted average of the dollar versus the euro (EUR), Japanese Yen (JPY), pound sterling (GBP), Canadian dollar (CAD), Swedish krona (SEK) and Swiss franc (CHF).
In this case, the rise in the DXY index leads to the strengthening of the US dollar.
Based on the economic calendar, it was impossible not to notice the planned task of the European Central Bank on March 11, where the interest rate, as expected, was left at the same level, and the parameters of the special asset purchase program PEPP (pandemic emergency purchase program) remained unchanged.
Everything went quietly and without too much noise as if the regulator is still considering possible maneuvers, yet investors are concerned about a very rapid increase in inflation, as well as a collapse in retail sales. But the head of the ECB refers to restrictive measures and the coronavirus crisis.
On Friday, a fairly large package of statistical data for some countries has been released.
The first to report was in the UK, where data on industrial production frightened many by the further acceleration of the decline from -3.3% to -4.9%, with a forecast of -4.0%. At the same time, the GDP data signal a further decline in the economy from -8.6% to -9.2%.
The result is a weakening sterling in the market.
Europe's data on the volume of industrial production turned out better, the decline was replaced by an increase from -0.2% to 0.1.
At the time of the publication of statistics, the euro was actively declining in value, but slight optimism on the part of industrial production slowed the decline.
The last to report was the United States on producer prices, where, as expected, recorded an acceleration from 1.7% to 2.8%, with a forecast of 2.7%.
This resulted in a positive market reaction which strengthened the dollar.
What happens on the trading chart?
After a rapid upward move, the Euro/Dollar currency pair found a resistance point near the psychological level of 1.2000. This price development was expected in the market, so many traders viewed the natural basis associated with the 1.2000 mark as an opportunity to enter short positions* (sell positions).
The expectations for the EUR/USD currency pair are based on the fact that the downward interest from the level of 1.2000 can go to the stage of recovery of the main corrective course (1.2349 ---> 1.1835). In this case, keeping the price below 1.1900 will open the way towards 1.1860-1.1835.
An alternative scenario of the market development will be considered if the price returns within the deviation of the psychological level of 1.2000.
The Pound/Dollar currency pair has a similar fluctuation structure, so, we started with an upward move from the 1.3800 variable pivot point, which brought market participants to the area of the 1.4000 psychological level (1.3950/1.4000/1.4050 ). The subsequent path was based on a logical basis associated with the 1.4000 level, which led to a reduction in the volume of long positions and a rebound.
Expectations for the GBP/USD currency pair consist of a possible return of the price to the point of the variable pivot of 1.3800 if market participants continue to work out the area of the psychological level along a downward trajectory.
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