Forex Daily Market Analysis from ForexMart

EUR/USD. May 3, 2021 | The US dollar started the week on a minor note

The US dollar ended April on a positive note, but on the first Monday in May, the american currency weakened to 1.2050. The main influence on the dynamics of the EUR/USD pair is provided by macroeconomic publications from the USA and the Eurozone.

At the end of last week, the US released data on personal income and spending of Americans in March. Revenues rose 21.1% m/m against the forecast of a rise of 20.1% and the previous decline of 7%. Expenses, in turn, increased by 4.2% on the expectation of an increase of 4.3% m/m and the previous decline of 1.0%. It should be noted that such a rapid growth in income is the result of cash payments to the population.

Additional support to the dollar was provided by the final value of the consumer confidence index in the US from the University of Michigan: in April the indicator rose to 88.3 points against the forecast of an increase to 87.3 and the previous value of 86.5 points.

The European currency was supported this morning by the statistics on the volume of retail sales in Germany in March: in monthly terms the indicator increased by 7.7% against the forecast of growth of only 3%. The annual rate rose 11% after falling 6.6% in February. At the same time, the indexes of business activity in the manufacturing sectors of the eurozone and Germany for April disappointed the markets, falling short of forecasts.

The United States will also publish PMI in the evening. In addition, there will be data on construction costs and the price paid index. And also the head of the US Federal Reserve System Jerome Powell will make a speech.

 

EUR/USD. May 4, 2021 | The dollar strengthened and returned to the level of 1.20

On Tuesday, the dollar began to recover and reached the level of 1.20. The US currency is supported by a positive fundamental background: high rates of vaccinations in the US, direct payments to the population and easing of restrictions.

The main problem today is that the dollar retains its status as a safe haven currency. Since the beginning of the year, the United States has been ahead of other countries in terms of economic recovery, but now Europe is showing significant progress in vaccinations and plans to ease restrictions. And global growth tends to be more favorable for high beta currencies than safe haven currencies. Therefore, together with the lifting of restrictions, the demand for the euro will return.

Yesterday was published data on business activity in the US manufacturing sector, which turned out to be much worse than forecasted. Economists had expected the index to rise from 64.7 to 65, but in April it fell to 60.7 points. And even these statistics did not allow the dollar to fall. Analysts say the dollar is rising mainly on expectations of a potentially strong Payroll employment report. Today during the day, the EUR/USD pair will moderately rise from the level of 1.20.

 

GBP/USD. 06.05 | The pair cannot decide on the direction of movement

The GBP/USD pair on Thursday started to rise to 1.3940 after a two-day flat at 1.3900. Today is rich in various events in the UK: attention should be paid to the elections in Scotland, the results of the meeting of the Bank of England and the publication of important economic reports.

The results of the parliamentary elections in Scotland will determine the holding of a repeated referendum on independence from Great Britain. The victory of the ruling national party will speed up the exit of Scotland from the United Kingdom, but this is unlikely to have a strong impact on the pound rate, since the issue of independence will be resolved for several years.

The meeting of the Bank of England is of no small importance today. The regulator decided to keep the base interest rate at 0.1%, and the volume of asset repurchases from the market – at 895 billion pounds. The redemption of government bonds is 875 billion pounds, and the volume of redemption of corporate bonds remained at 20 billion pounds.

Short-term support for the sterling today was provided by data on business activity in the service sector in April in the UK: the indicator rose to 61.0 against the forecast of growth to 60.1 points. In the US today, it is worth paying attention to the publication of the number of applications for unemployment benefits: the report showed that the number of applications fell better than forecast, to 498 thousand. This gave the US dollar some support, which allowed the GBP/USD pair to return to the 1.39 level.

 

May 07 | USD / CHF technical analysis: H4 chart, Pivot levels

The US dollar against the Swiss franc at today's trading has rewritten the minimum since February 26 at around 0.9057.

Bouncing off the lows, the USD / CHF price is correcting towards the daily pivot level.

The medium-term trend is directed downwards, therefore, upon completion of the correction, it is more likely that a further decline can be predicted, but, most likely, this will happen already next week.

Daily Pivot - 0.9094;
Daily Resistance 1 - 0.9119, DR2 - 0.9169, DR3 - 0.9194;
Daily Support 1 - 0.9044, DS2 - 0.9019, DS3 - 0.8968.

Weekly Pivot - 0.9129;
Weekly Resistance 1 - 0.9180, WR2 - 0.9231, WR3 - 0.9281;
Weekly Support 1 - 0.9078, WS2 - 0.9028, WS3 - 0.8977.

Monthly Pivot - 0.9226.

 

EUR/USD. May 11, 2021 | Dollar continues to decline after Friday's Payrolls report

The US dollar accelerated its decline after the release of Friday's Non-farm Payrolls report, according to which the number of new jobs created was almost 25% lower than forecasted – 266 thousand against 1 million. The unemployment rate rose from 6% to 6.1%. The latest statistics turned out to be an unexpected shock for market participants, and the quotes of the EUR/USD pair rose to the level of 1.2180.

In total, during the pandemic, the American economy lost 22 million jobs, and about 8 million are still not restored.

Today the pair continues to fluctuate slightly below the 1.22 level. The economic calendar is of little interest. All market participants' attention is directed to the upcoming statistics: on Wednesday the US will publish statistics on consumer prices, on Friday – on retail sales.

The oil market on May 11, 2021

Brent quotes on Tuesday decline from the area of local highs above $69 per barrel. The current price of the asset is $67.50 per barrel.

Black gold is declining amid the gradual reopening of the Colonial Pipeline Co. pipeline system, which suspended operations last Friday due to a hacker attack. This pipeline system is the main source of gasoline, diesel and jet fuel supplies to the US East Coast.

The rapid spread of the coronavirus in India continues to put additional pressure on investor sentiment. The government of the country came face to face with the need to introduce a harsh isolation regime.

In the near future, oil prices can only be supported by data on crude oil reserves in the United States. Analysts expect that statistics from the Ministry of Energy (May 12) will show a decrease in reserves by 2.3 million barrels per week. Gasoline stocks are expected to fall by about 400,000 barrels. Today you should pay attention to the monthly OPEC report, which will include data on production in April.

 

EUR/USD. May 12, 2021 | Euro is correcting after strong growth

The EUR/USD pair declines slightly on Wednesday after a sharp rise to the level of 1.2180. The current quotation of the asset is 1.2125.

The statistics from the eurozone published the day before, as a whole, pleased investors: the index of sentiment in German business circles in May rose to 84.4 points from the previous 70.7. The forecast assumed a rise to 72.0 points. The same indicator for the entire euro area soared to the level of 84.0 points from the previous 66.3. Such data speaks about the attenuation of the third wave of coronavirus in Europe and has a positive effect on business prospects.

Today you should pay attention to the report on the volume of industrial production in the eurozone for March. The indicator came out worse than expected, rising only 0.1% against expectations of 0.7% growth.

In the US, the most anticipated indicator of the week will be published – the consumer price index for April. Median forecasts assume only 0.2% MoM gain is possible after the 0.6% rise in March. If the data is in line with expectations, the dollar will have a chance to strengthen and return to the area below 1.21.

GBP/USD. May 12, 2021 | The pound sterling breaks all records

The pound sterling remains the leader of the foreign exchange market, demonstrating a sharp rise to 1.4170, which was the highest since the end of February. In general, the pair is approaching the level of 1.42 – the last time such values of the British currency rate were recorded in April 2018.

The pound received strong support on the results of the regional elections. Scottish National Party SNP won 64 seats in the Scottish Parliament, one less for the majority. Analysts note that calls for a referendum on independence will continue, but this is unlikely to lead to increased political risks for the pound sterling.

Additional positive was brought by the report from the BRC chain: the volume of retail sales in April on an annualized basis increased by 39.6% after increasing by 20.3% a month earlier.

A busy news day awaits the UK today. The country's GDP contracted by 1.5% on a quarterly basis (which turned out to be better than the forecast of -1.6%). Industrial production statistics in March showed an increase in the indicator by 1.8% (against the forecast of growth by 1%). The data on the trade balance reflected a decrease of 6.55 billion.

It can be said that the strong statistics were the result of successful mass vaccinations and the relaxation of quarantines.

 

EUR/USD. May 13, 2021 | Dollar remains strong after inflation data

The EUR/USD pair has weakened noticeably after the release of yesterday's statistics on inflation in the US. The current quote for the pair is 1.2050. According to the US Department of Labor, in April, consumer prices rose at their most in almost 12 years due to increased demand amid the opening of the economy. Excluding food and energy prices, consumer prices rose 0.9%, the highest since April 1982. Annualized inflation rose to 4.2%, the highest since 2008.

There is a logical reason for this rise in prices: as the American economy recovers, the consumer is faced with a noticeably reduced supply, which pushes prices up.

Additional pressure on the euro was exerted by macroeconomic reports from the eurozone. According to Eurostat, industrial production in the region rose 0.1% in March, after falling 1.2% a month earlier. Experts forecast an increase of 0.7%. On an annualized basis, the indicator grew by 10.9% against the forecast of 11.6%.

Today we should pay attention to the report on the number of initial claims for unemployment benefits and the producer price index in the United States.

 

GBP/USD. May 17, 2021 | Sterling weakly declines after rising to 1.41

The British pound suspended its gains in the 1.4100 area and the GBP/USD pair bounced back to 1.4090. The pound is under pressure from concerns about new coronavirus outbreaks in the country. On Friday, British Prime Minister Boris Johnson said that the weakening of the lockdown is in question due to the risk of the spread of the Indian strain of the coronavirus.

Earlier, the dynamics of the dollar was influenced by economic reports from the University of Michigan: the consumer expectations index in May fell from 82.7 to 77.6 points, while the forecast assumed an increase to 85 points. The consumer sentiment index was 82.8 points against the forecast of 90.4 points. The index of current conditions fell from 97.2 to 90.8 points, experts had expected an increase to 99.6 points.

Today the macroeconomic calendar is empty. Only the statements of the Bank of England and FOMC representatives can arouse interest.

The RSI indicator weakly declines from the neutral zone, which indicates further moderate weakening of the pound sterling.

GBP/USD. May 14, 2021 | Sterling rises moderately towards 1.4100

The British currency continues to show signs of strengthening against the US dollar, recovering from 1.40 to 1.41. The current quote for the GBP/USD pair is 1.4080.

The economic calendar for the UK is empty today, all investors' attention will be drawn to the statistics from the US. In particular, we are waiting for a report on retail sales, data on imports and exports, as well as on industrial production in April. Of particular interest will be the consumer expectations and sentiment index from the University of Michigan in May.

In general, the pound sterling retains potential for growth, as the growth of the UK economy in March was better than forecasted: the economy grew by 2.1% compared to the previous month, while growth was expected by 1.5%.

Moreover, yesterday the chief economist of the Bank of England Andrew Haldane said that inflation in the UK will exceed 2% by the end of 2021. He also noted that it is quite possible to expect double-digit GDP growth over the year.

During the day, market participants will analyze statistics from the US, which will allow the GBP/USD pair to determine the direction of movement before the weekend.

 

Brent. 18.05 | Oil market reached new highs

The oil market again demonstrates significant growth: Brent quotes rose today to $70 per barrel.

The prices for «black gold» are supported by the improved forecasts for the demand for energy resources, despite the rather weak statistics from the USA and China. For example, in the Celestial Empire, the report on retail sales showed an increase of 17.7%, which is significantly worse than the expected 24.9%.

Investors are quite optimistic, expecting that demand this year will still reach its peaks in the second half of the year. Similar forecasts were presented to OPEC and the International Energy Agency. It should be noted that analysts ignored the difficult epidemiological situation in India, the world's third largest oil importer.

In addition to fundamental factors, Brent quotes are supported by the decline in the US dollar. Greenback is being sold amid the Fed's wait-and-see attitude, as well as weak US macroeconomic reporting. Recent reports indicate that the US economy will not recover as fast as previous forecasts suggested.

 

Brent. May 19, 2021 | Oil declines after local highs

Oil prices are falling for the second day in a row amid concerns about lower demand due to a new wave of coronavirus in Asia. Additional pressure on Brent quotes is exerted by fears that the US Federal Reserve will raise interest rates due to rising inflation, which may limit further economic growth.

On Wednesday, the price of «black gold» fell to $67.38 per barrel, although on Monday Brent was trading above $70. This growth was driven by optimism about the lifting of coronavirus restrictions in the United States and Europe. However, it did not last long as India, Taiwan, Vietnam and Thailand reported a sharp spike in Covid cases.

Moreover, the uncertainty due to inflation has also forced investors to withdraw from riskier assets such as oil. Analysts note that the US Federal Reserve may raise rates due to fears of inflation, thereby affecting growth prospects and demand for commodities.

A report from the American Petroleum Institute (API) was released yesterday, according to which US oil inventories rose by 620 thousand barrels, while gasoline and distillate stocks fell sharply last week. Today investors are awaiting the release of similar data on reserves from the US Energy Information Administration.

GBP/USD. May 19, 2021 | Sterling is correcting after strong growth

Yesterday was marked by a sharp rise in the pound sterling to the level of 1.4220. However, today the GBP/USD pair started to decline to the level of 1.4160.

The British currency received support amid the improvement in the epidemiological situation in the UK, where quarantine restrictions have been significantly eased since May 17. An additional positive was brought by economic statistics, according to which, in April, the consumer price index rose by 0.6%, which coincided with expectations, and the producer purchase price index rose by 1.2%, which turned out to be better than the 1.1% forecast.

At the same time, the pressure on the dollar was exerted yesterday by data on construction in the United States: the number of permits for building houses issued in April amounted to 1.76 million, while expectations were 1.77 million.

Today, the American currency is strengthening as part of the correction and in anticipation of the evening publication of the FOMC minutes. The pound sterling still has strong upside potential as economic data show a strengthening UK economy: the UK labor market is on the rise – 84,000 new jobs were created in March, benefits applications fell by 15,000 and unemployment fell from 4.9% to 4.8%.

 

EUR/USD. May 20, 2021 | Euro is recovering after yesterday's drawdown

The EUR/USD pair is recovering its positions on Thursday after yesterday's drawdown to the level of 1.2150. The current quote for the pair is 1.2190.

Yesterday, the US Federal Reserve released the minutes of the last meeting. The document says that the US economy is still very far from the regulator's goals, and supply problems continue to impede its recovery. At the same time, it was noted that economic activity has nevertheless increased sharply recently.

Regarding the state of the labor market, the Federal Reserve is confident that the growth rates of employment in certain sectors have become lower than they were before. The global outlook for inflation has not changed, and core inflation remains weak and insignificant.

The US dollar weakened somewhat after the publication of the minutes, as the regulator did not clearly indicate its position on stimulating and supporting the economy. As a result, there were rumors in the market that a strong labor market report for May could be a signal for a $ 120 billion reduction in the asset purchase program in June.

At the same time, the European currency is supported by the improved prospects for the economic recovery of the eurozone. If the situation continues to improve, the ECB may consider the possibility of reducing the volume of the quantitative easing program at the end of this year.

 

EUR/USD. May 24, 2021 | The pair is in the range of 1.2150-1.2250

At the beginning of the new trading week, the euro continues to trade in the range of 1.2150-1.2250. The current price of the EUR/USD pair is 1.2200.

The European currency was supported by the publication of the composite index of business activity (PMI) in industry and services of 19 eurozone countries in May. According to preliminary estimates, the indicator rose to 56.9 points in May from 53.8 points in April. At the same time, analysts had expected the indicator to rise to 55.1 points. Such figures became a record for three years and three months.

The index of business activity in the service sector of the euro zone in May, according to preliminary estimates, rose to 55.1 points against 50.5 points in April. Experts predicted growth to 52.3 points.

It is worth noting that many financial institutions are beginning to revise their forecasts for the euro area. For example, the Bundesbank believes that Germany will reach pre-pandemic levels in the fall of this year, and consumer prices may rise by 4%.

 

EUR/USD. May 25, 2021 | Euro is correcting after strong growth

The euro rate accelerated its growth on Tuesday, breaking through the upper boundary of the sideways trend 1.2150-1.2250. The European currency continues to be supported by the optimism of investors regarding the imminent recovery of global economies. And against this background, the demand for the «safe» dollar is declining, which is putting strong pressure on the American currency.

Additional support for the euro was provided by economic data from Germany. According to the final estimate of the country's Federal Bureau of Statistics, GDP in the first quarter of 2021 declined by 1.8% against a projected decline of 1.7%. On an annualized basis, the GDP of Europe's largest economy fell 3.4%, while experts had expected a decline of 3.3%.

The index of business expectations in Germany in May rose to 102.9 points (from 99.2), the forecast assumed the indicator at the level of 101.4 points. The business climate index was 99.2 points (forecast – 98.2 points).

However, the RSI indicator bounced off the resistance area, which signals a weakening of the euro and the return of the EUR/USD pair to the range of 1.2150-1.2250.

 

EUR/USD. May 26, 2021 | Euro declines from highs

The EUR/USD pair declines on Wednesday from the area of local highs above 1.2250 to the level of 1.2220. However, market participants expect that the euro will continue to rise in the near future. It is possible that this may happen already before the next meeting of the ECB, which is scheduled for June 10.

The day before, traders drew attention to the data on German GDP and IFO business optimism. According to the published statistics, the German economy in the first quarter of this year contracted more than expected, falling by 1.8%. Ifo German business sentiment index rose to a 2-year high in May. The German business sentiment index rose to 99.2 in May from 96.6 in April. Economists had forecast the index would rise to 98. Additional support for the euro is provided by the general market optimism, which stimulates the growth of demand for risky assets.

As for the American dollar, everything here depends on the rhetoric of the US Federal Reserve System (FRS). On the eve of the regulator's representatives confirmed their adherence to a soft monetary policy and generally adhered to the «dovish» rhetoric. And this puts pressure on the greenback's course.

Today the macroeconomic calendar is completely empty. The pair will continue to trade below the upper border of the 1.2150-1.2250 range.

 

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EUR/USD. May 27, 2021 | Dollar strengthened on positive macro data

The EUR/USD pair dropped below the level of 1.2200 and the bulls are unlikely to be able to return the euro to the area of local highs in the near future. The current quote of the instrument is 1.2180.

Important macroeconomic statistics were not published yesterday, however, the dollar strengthened against the background of good yields on US government bonds, as well as due to general market neutrality. At the same time, the euro was pressured by data from the GfK company, according to which the leading consumer confidence index for June rose to -7 points from -8.6 points in May, worse than expected.

Today the focus of traders' attention is shifted to the USA, where the GDP data in the second estimate was published. The US economy expanded by 6.4% qoq, worse than expected. The initial level is also fixed at 6.4%. Data on the volume of orders for durable goods in April showed an increase of 1.0%, which turned out to be better than analysts' forecasts, who had expected an increase of 0.8% m/m.

Also today you should pay attention to the number of initial applications for unemployment benefits in the United States. The number of Americans who filed new applications for unemployment benefits last week fell more than expected – to 406 thousand. Analysts had expected 425 thousand applications. Taking into account these statistics, we can conclude that the US dollar will continue to strengthen and the pair quotes will return to the 1.2150 area.

 

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EUR/USD. May 28, 2021 | The dollar strengthens below 1.22

The main currency pair continues to trade below the 1.2200 level. The current quote for the pair is 1.2180.

The dollar was supported yesterday by macroeconomic statistics on the US labor market. According to the Ministry of Labor, the number of claims for unemployment benefits for the week was 406 thousand, reflecting a sharp decrease compared to last week at the level of 444 thousand. Analysts predicted the figure at the level of 425 thousand.

The second estimate of US GDP for the first quarter did not reflect changes compared to the initial estimate, confirming the economic growth of 6.4% qoq. Experts had expected growth to 6.5% q/q. The volume of orders for durable goods in the US in April fell by 1.3% m/m after an increase in March by 0.8% m/m and the forecast of an increase this time by the same 0.8% m/m.

The dynamics of the dollar is now mainly influenced by the position of the FRS. If the regulator continues to continue its stimulating policy, ignoring inflationary risks, the greenback has little chance of strengthening. US Treasury Chief Janet Yellen believes that annual inflation in the country will be high at least until the end of this year, and Yellen estimates the recent inflationary surge as a temporary phenomenon.

 

European indices Stoxx Europe 600 and DAX on Friday updated records

The composite index of the largest enterprises in the region Stoxx Europe 600 increased by 0.57%, to a record 448.98 points. The German DAX climbed 0.74% and surpassed the 15,500 mark for the first time.

The French CAC 40 gained 0.75% and hit its highest level in 21 years.

The British FTSE 100 indicator rose 0.04%. Italy's FTSE MIB and Spain's IBEX 35 added 0.45% and 0.42%, respectively.

Global markets are being supported by signs that the US economic recovery from the COVID-19 pandemic is gaining momentum.

The data on the US labor market, released yesterday, showed a more significant than expected reduction in the number of applications for unemployment benefits in the country. The number of new applications last week decreased by 39 thousand, to 406 thousand, the lowest since the beginning of the coronavirus pandemic. Analysts on average expected the number of applications to decrease to 425 thousand.

The consensus forecast of experts provides for the growth of the PCE Core index in April by 2.9%, the highest since 1993.

Market participants are also watching talks in Washington on an infrastructure spending plan to further support the economy.

In the fourth quarter of last year, according to revised data, French GDP fell by 1.5%, not 1.4% as previously reported.

Shares in UK developer Vistry Group PLC jumped 4.3% in Friday trading, ranking among the top gainers among the Stoxx Europe 600 components.

Siemens AG, Europe's largest industrial conglomerate, rose 3.8%.

The leaders of the fall were the shares of the Spanish bank Banco de Sabadell SA, which lost 4.5%.

Antofagasta Plc, one of the world's largest copper producers, lost 2.2%.

 

The dollar is waiting for specifics from the Fed

Fundamentally, the dollar looks weak. Arguments in favor of its further decline have been listed for several weeks. If last week a deeper sinking of the dollar did not take place, in particular, due to large placements of the US Treasury, then it is quite possible to fall to new lows this week. The next few sessions are exempted from bond placements.

It is worth noting that the marks of 89.00–90.0 points serve as a kind of support for the American currency index, which is quite efficient. Despite the increased pressure, the dollar does not fall below. Yes, the American dollar is weak, but in order to gain more arguments in favor of further weakening, you need to look around and carefully study what is happening. Not everything is so simple here, some statements of the FRS members caused some distortions in the markets. And yet, the US Central Bank in the near future may begin substantively talking about the beginning of the reduction of quantitative easing.

Real estate in the USA is becoming more expensive at alarming rates, which provokes comparison of the current situation with the period of 2006-2007. After the coronavirus crisis, it was not enough to get into a mortgage. At least some kind of reaction is now expected from the Fed.

Expectations of hints of at least some action support the dollar a little, at least they are able to keep it from falling deeper. At the same time, the technical picture in the dollar index on the weekly time frame indicates the possibility of a double bottom formation around 89.00 points.