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Yesterday's economic calendar had an important statistical indicator, which the market worked out contrary to fundamental analysis. We will analyze below the causes and consequences of what happened.
Here's the detail of the economic calendar on April 13:
The United States released its consumer price index, where not just growth was recorded, but a strong acceleration from 1.7% to 2.6%.
What is a consumer price index?
The consumer price index is an indicator of inflation in a country, prepared by the US Bureau of Labor Statistics, which determines the change in prices of a selected basket of goods and services.
Studying the fundamental analysis, it should be noted that an increase in inflation leads to the strengthening of the national currency, but if one compares the statistics published yesterday and the movement of the US dollar, the picture will be the opposite.
What is the reason for the discrepancy?
The whole problem of the divergence lies in investors' fears, who are afraid that the Federal Reserve System (US Central Bank) will change its plans and monetary policy due to a very rapid inflation growth. To put it simply, there is uncertainty, which is what traders are afraid of, and this leads to a weakening of the US dollar and a mismatch of fundamental analysis.
During the previous review, such a scenario was already taken into account. Therefore, traders should be prepared for non-standard market behavior.
Analysis of trading charts from April 13:
Yesterday, the Euro currency (EUR/USD) managed to strengthen by 0.31%, which is about 50 points. The surge in activity was based on the start of the US trading session, where American statistics were published. Speculators broke through the side channel of 1.1860/1.1920 along an ascending trajectory, which resulted in an inertia.
Analyzing the trading chart, speculators used investors' fears related to inflation, since the news release and market movement was in sync.
The trading recommendation on April 13 considered the method of breaking through a particular border of the side channel 1.1860/1.1920. Based on this, it was possible to earn profit on the surge in activity.
Meanwhile, the British currency (GBP/USD) was quite calm yesterday in terms of speculation and spent almost all its time in the range of 1.3720/1.3765.
The trading recommendation on April 13 implied a breakdown of one of the key values of 1.3650 (sell) or 1.3785 (buy). No deals were opened.
Trading recommendations of EUR/USD and GBP/USD on April 14, 2021
Today, the only data is Europe's volume of industrial production, where the growth rate of 0.1% should be replaced by a decline of -0.9%, which may lead to euro's weakening after its recent growth.
What is industrial production data?
Industrial production data are published by the Statistical Office of the European Union (Eurostat) and reflect the volume of production in factories and manufacturing industries.
The growing decline in industrial production may lead to a weakening of the national currency, that is, the single European currency.
EU 9:00 Universal time - industrial production.
Looking at the EUR/USD trading chart, there is an inertial upward movement, which has already brought the quote within the psychological level of 1.2000 (1.1950/1.2000/1.2050).
Considering euro's local overbought status, as well as the pressure on long positions from the area of the psychological level, we can assume that that the upward inertia may well slow down, which will subsequently lead to stagnation and a pullback.
To put it simply, if the complex of technical and fundamental factors coincide in the market, then we will see a local weakening of the euro.
As for the trading chart of GBP/USD, it is worth noting that an inertial upward movement occurred during the Asian session, which led to the update of the local high (1.3781) from April 8.
In this situation, we should pay special attention to the area of 1.3780/1.3800, since a pullback towards the level of 1.3750 will not be excluded if the price does not hold above the level 1.3800.
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