05.11.201910:54 Forex Analysis & Reviews: Trading plan for EUR / USD and GBP / USD on 11/05/2019

At first glance, the data received from Europe yesterday was positive. In particular, the index of business activity in the manufacturing sector of Europe grew from 45.7 to 45.9. At the same time, this same index grew from 41.7 to 42.1 in Germany, while they expected growth to 41.9. In France, the index of business activity in the manufacturing sector rose from 50.1 to 50.7, although growth was forecast to be up to 50.5. However, the growth of the index of business activity in the manufacturing sector affects only the two largest economies of the euro area, which turned out to be sufficient for the growth of the general index. Meanwhile, in Italy, the index of business activity in the manufacturing sector fell from 47.8 to 47.7, which, incidentally, is not bad, since they expected a decrease to 47.6. But in Spain, everything is very bad, as the index of business activity in the manufacturing sector fell from 47.7 to 46.8, although forecasts spoke of a decrease to 47.5. In other words, there is a further increase in the gap between Germany and France on the one hand, and all other countries of the eurozone on the other. Nevertheless, the scale of the economies of Germany and France is such that this is enough to create an extremely pleasant picture as a whole.

Manufacturing PMI (Europe):

The United Kingdom also turned out to be quite good, where the index of business activity in the construction sector grew from 43.3 to 44.2. Nevertheless, it still remains below 50.0 points, which indicates that the industry is not in the best condition.

Construction sector business activity index (UK):

However, the data on manufacturing orders in the United States are clearly worrying, as they fell by 0.6%. And not only did they expect a reduction of 0.5%, but also orders are reduced for the second month in a row. Of course, this still does not prove anything, since it is necessary that the trend should be much more stable. Nevertheless, this is still another argument in favor of allegations of the inevitability of a recession.

Production Orders (United States):

Looking at all this data, yesterday's dollar growth is only bewildering. However, the dollar was helped by rumors about the course of negotiations between Washington and Beijing. Swollen to intergalactic proportions and the trade conflict between the United States and Beijing periodically becomes a central theme for the media, which precisely this topic became the main driving force in the market yesterday The fact is that in various mass media of agitation and misinformation, reports began to appear that negotiations had moved off the ground and Washington could reduce the tax burden on Chinese imports by a total of 112 billion dollars. Thus, even a hint at the possible end of the trade war, which, according to many, is harmful to the growth of the global economy, has given the dollar strength.

If we talk about today, then only political factors can prevent a further weakening of the single European currency and the pound. For example, in Europe, they expect a deepening decline in producer prices from -0.8% to -1.2%, which crosses out any discussion about the possible increase in inflation in the Old World. Naturally, the confirmation of these forecasts will finally convince everyone that this year the refinancing rate of the European Central Bank will be in the negative zone. Christine Lagarde hinted about this yesterday, saying that the regulator will closely monitor inflationary dynamics.

Producer Prices (Europe):

Today, the index of business activity in the UK services sector was published, and forecasts for which are completely opposite. Judging by one source, its growth is projected from 49.5 to 49.7 while other sources claim that the index of business activity in the service sector will drop to 49.4. Now, considering the fact that investors simply have nothing to rely on, they will act solely on the situation, and the reaction will turn out to be rather restrained.

Services Business Activity Index (UK):

However, forecasts for US statistics are quite positive. Thus, an increase in the number of open vacancies is expected from 7,051 thousand to 7,211 thousand. This indicates that finding work will become a little easier, which means that the recently recorded increase in unemployment may be temporary. In addition, the index of business activity in the services sector should grow from 50.9 to 51.0, and the composite index from 51.0 to 51.2. Thus, if there is no refutation of yesterday's rumors regarding negotiations between Washington and Beijing today, the dollar will continue to grow.

Composite Business Activity Index (United States):

The euro/dollar currency pair worked out the resistance level of 1.1180 once again, sending the quote back to the fulcrum. It is likely to assume that if the characteristic downward sentiment is maintained and the price is fixed lower than 1.1010, the quotation may well go to the level of 1.1080. Otherwise, the existing stagnation will go into a wider amplitude of oscillation.

The pound/dollar currency pair did not manage to overcome the overhanging level of 1.3000, eventually having a gradual, but still a return. It is likely to assume that after a slight pullback / stagnation relative to current points, downward interest may resume, bringing us closer to the level of 1.2800.