Thread: Daily Market Analysis from ForexMart

EUR/USD. May 06, 2020 – Euro broke down the level of 1.08

The euro remains under pressure amid weak demand for risky assets due to rising tensions between the US and China. At the same time, the US dollar received support from the strong macroeconomic statistics. Data on business activity in the service sector showed a decrease from 52.5 to 41.8 points. Fresh data significantly exceeded the expectations of analysts who predicted the index to fall to around 38.0.

The main event of yesterday was a statement by the German Constitutional Court, which accused the European Central Bank of exceeding its authority in the implementation of certain points of the quantitative easing program (QE).

Additional pressure on the European currency was provided by weak statistics from the eurozone: the producer price index fell to -1.5% (forecast -1.3%). And the publication of the report on retail sales showed a drop from 0.6% to -11.2%.

The current quotation of the EUR/USD pair is 1.0780. The RSI indicator on the H1 chart bounced off the support level, which signals the completion of the downward euro rally. During the day, the pair will continue to fluctuate slightly near the level of 1.0800.

EUR/USD. May 07, 2020 – Euro continues to trade below 1.08

On Thursday, the euro continues to decline, reaching 1.0785. Pressure on the European currency was exerted by a court decision to challenge Germany’s participation in the eurozone economy stimulus program.

Additional pressure on the asset was provided by weak data from Europe. In particular, the business activity index in the eurozone services sector in April fell from 26.4 points to 12, while the forecast suggested a decrease to 11.7 points. Composite business activity index was 13.6 points against the forecast of 13.5. Moreover, the European Commission has adjusted the forecast for unemployment in the eurozone from 7.5% to 9.6% against the backdrop of the fight against coronavirus.

Moreover, weak macroeconomic data came out in the United States either, however, the «Eurobulls» were not able to take control of the situation. According to ADP, in April, a record 20.236 million Americans lost their jobs.

Today you should pay attention to the data on the change in the number of initial applications for unemployment benefits in the United States over the past week.

EUR/USD. May 08, 2020 – Dollar weakens awaiting labor market statistics

Yesterday, trading on the euro ended with growth to the level of 1.0850. The US dollar showed some weakening, as an increase in risk appetite of investors led to a decrease in demand for safe assets.

In addition, investors are worried about the negative interest rate by the US Federal Reserve. Experts note that the yield on 2-year Treasury bonds, sensitive to the expectations of the monetary policy of the Federal Reserve, fell to a record low closing value of 0.133%.

Yesterday, macroeconomic statistics from the United States also acted as a pressure factor on the US dollar. Over the past week, another 3.169 million Americans have filed initial jobless claims. As a result, since the end of March, there have been 33.5 million such applicants.

Today we should pay attention to an important report on the labor market in the States. Analysts' forecasts are rather gloomy: employment in non-agricultural sectors is expected to decrease by 22 million jobs, and the unemployment rate may jump from 4.4% to 16%. In anticipation of these statistics, the EUR/USD pair will continue to grow above the level of 1.0850.

Brent. May, 11 – Oil continues to decline at the beginning of the new week

At the beginning of the trading week, oil continues to decline to $30 per barrel. However, buyers are able to maintain their positions even against the backdrop of doubts about the success of the new OPEC energy pact, as well as amid the pessimistic comments by Fed representatives about the pace of economic recovery after the pandemic.

Brent remains under pressure from rising stocks and still depressed oil demand. According to data from the IEA published last week, US stocks rose 4.6 million barrels (to 532.2 million barrels). Moreover, inventory growth has been observed for the third week in a row.

Thus, the collapse of demand, coupled with the lack of available storage space for hydrocarbons, will inevitably lead to a further decrease in oil quotes.

GBP/USD. May 12, 2020 – Sterling shows growth despite many negative factors

The GBP/USD pair began the day with growth to the area of ​​1.2370. The British currency is growing, despite the deteriorating market sentiment and weak English statistics. Growing demand for defensive assets amid news of repeated outbreaks of coronavirus in Asia could put pressure on the British pound and support the US dollar.

An additional negative for sterling are disappointing forecasts regarding the dynamics of the English economy. The Bank of England said that by the end of 2020, the UK economy is expected to decline by 14%, which could be the worst indicator in almost 300 years.

Tomorrow you should pay attention to the data on the country's GDP for March. The economy is expected to decline by 7%. If the forecast is confirmed, the pressure on the pound will intensify, and the pair GBP/USD will return to the area of ​​1.2200.

Another driver of decline is the political uncertainty in the region. By the end of the year, the country's authorities have to agree with the EU on Brexit issues. Thus, in the current environment, the pound is unlikely to have enough strength to grow.

EUR/USD. May 13, 2020 – Euro has come under pressure from industrial production data

The euro failed to overcome the level of 1.0880 yesterday and made a decline to the level of 1.0830. Today, data on the volume of industrial production in annual terms were published in the eurozone. The rate of decline increased from -2.2% to -12.9%, which put pressure on the euro. During the day, the EUR/USD pair will continue to decline to 1.08.

Yesterday, the US provided April inflation data, according to which the consumer price index fell to 0.3%. The last time such low inflation was recorded in October 2015.

Today, attention should be paid to the speech of the head of the US Federal Reserve. It is expected that the head of the regulator will indicate the need to continue the program of quantitative easing and expand the balance of the Fed. In March, BlackRock, through which the bulk of FOMC operations go, announced that the Fed's balance sheet could be expanded to $9 trillion. Today, this figure is $6.72 trillion.

The expansion of the balance traditionally leads to a weakening dollar, since an increase in the money supply leads to a depreciation of the national currency.

EUR/USD. May 14, 2020 – Euro declines after J. Powell speech

On Thursday, the euro declines, continuing the dynamics of yesterday. The current quotation of the EUR/USD pair is 1.0775. Pressure was exerted by the speech of the head of the US Federal Reserve Jerome Powell. He noted that economic forecasts for the US are «extremely uncertain and subject to significant negative risks.» At the same time, the possibility of negative interest rates is not yet considered by the regulator.

Market participants reacted to Powell's performance with sales of risky assets.

Also, the tense situation between the US and China remains the focus of markets. The United States continues to accuse the PRC of spreading the coronavirus, while Beijing, in turn, is considering the possibility of retaliatory steps (in the case of the imposition of sanctions by America).

Today, attention should be paid to data on changes in the number of initial applications for unemployment benefits in the United States. Experts predict a decline to 2.500K.

EUR/USD. May 25, 2020 – Euro remains under pressure at the beginning of the week

The euro continues to weaken at the beginning of the new week. The current quotation of the EUR/USD pair is 1.0900, however, at the start of trading, the euro was located at 1.0860. The dollar is now being supported by its «safe haven» status amid the uncertainty surrounding China’s new national security bill.

Investors fear that a law prohibiting terrorist and separatist activities will complicate the observance of the rights and freedoms of the people of Hong Kong, which once already led to a wave of protests. At the same time, the United States may intervene in this matter, which will further aggravate relations between the two largest economies in the world and provoke an escape from risky assets.

Today in the US is a day off in honor of the celebration of National Memorial Day. The macroeconomic calendar is almost empty, you should pay attention only to data on German GDP for the I quarter. Statistics confirmed a 2.2% decline in the economy, which was the largest decline since the first quarter of 2009. In annual terms, the decline in GDP amounted to 2.3%. All results coincided with analysts' forecasts.

EUR/USD. May 26, 2020 – Euro rose sharply to 1.0970

On Tuesday, the euro started to rise sharply, reaching 1.0970. Support for the currency was provided by the statistics on the consumer climate index GfK in Germany in June: the figure recovered to -18.9 points after falling to -23.4 in May. The improvement of the index gave a signal about the consumer’s readiness to quit quarantine completely, which is not bad both for the German economy and for the economy of the entire eurozone.

In the afternoon, attention should be paid to the publication of the ECB's report on financial stability, but it is unlikely to bring any surprises, since all relevant information is constantly coming from the eurozone finance ministers in the process of agreeing on a stabilization fund of 500-600 billion euros.

In the evening hours data on sales of new homes in the United States in April will be published. Experts predict a sharp decline to 492 thousand against the March figure of 627 thousand. In addition, the May value of the Conference Board consumer confidence index, which could recover to 87.1 after the April decline to 86.9, will be of interest.

EUR/USD. May 27, 2020 – Euro updated two-month high

The euro has shown a sharp jump in prices to the level of 1.1030 amid a recovery in global economic activity due to the lifting of restrictions in many countries. Expectations that the economy will return to pre-crisis levels support risky assets.

At the same time, market participants are monitoring the situation around tensions between the United States and China. Also, pressure on the euro may increase if many EU countries oppose the creation of a fund of 500 billion euros. As it’s known, Germany and France have already agreed on the creation of a fund, but not all EU heads of state share their views.

Yesterday, statistics on new home sales in the United States were published – the indicator unexpectedly increased from 619 thousand in March to 623 thousand in April. Analysts predicted a serious drop in sales. Moreover, the Conference Board consumer confidence index for May rose to 86.6 points from 85.7 earlier. These data provided the dollar with short-term support, but today the growth of the European currency will continue. The main goal of the «bulls» is the level of 1.1050.