Market Analysis – EURUSD
The Euro is showing flat trading dynamics against the US Dollar today, trying to develop the downward momentum formed the day before, when it retreated from its local highs since March 4th. The instrument failed to reach strong resistance at the psychological level of 1.2000 even after three consecutive days of bullish movement. Traders are awaiting for further market drivers and momentum in the price as the overall price movement this month has been in favour of the Euro, but yesterday’s price movement gave traders reason to wait for a more decisive price movement once again.
The positions of Euro on Thursday were under pressure from not the most confident of economic statistics from Europe, while the data from the US showed a significant increase in the dynamics of retail sales in March. The Consumer Price Index in Germany for March increased by 0.5% MoM and 1.7% YoY, which coincided with expectations and did not have a noticeable effect on the dynamics of the instrument. At the same time, the harmonized Consumer Price Index remained at 2%, which is the target value for the European regulator.
Overall, the situation in the leading European economy remains difficult, which puts pressure on the Euro. According to the latest forecast of leading research institutes, compiled for the German Ministry of Economy, in the first quarter, the national Gross Domestic Product may contract by 1.8%, and generally the economy should grow by 3.7% over the year, which is 1.0% less than the previous forecast. The real economic recovery will begin only in 2022, when it should grow by 3.9%.
Reports from the IMF experts predict the return of the general European economy to the pre-crisis level also no earlier than 2022. In the meantime, growth continues to slow down due to the intensification of the pandemic in the EU and the accompanying tightening of quarantine measures. German Health Minister, Jens Spahn, called for the tightening of quarantine measures in 16 federal states throughout the country in order to try to slow down the third wave of the increase in the incidence.
Across the Atlantic, Retail sales and Initial Jobless Claims released yesterday were positive. The volume of retail sales in March rose by 9.8%, significantly exceeding the 5.9% expected by the market. Experts believe that the positive result was achieved due to the recently approved package of financial support for the economy, which provides for large direct payments to the population. Sales of clothing, building materials, and sporting goods rose most notably. Data on initial jobless claims is also encouraging for investors. The indicator fell from 769,000 to 576,000, which is a significantly lower figure and indicates the recovery of the US labor market.
The Euro yesterday weakened against its main competitors including against the Australian Dollar, the Pound, and the Yen. The Euro decreased in value against most currencies and the currency index significantly declined. Though it should be noted, the currency index this morning is again increasing in value and has corrected approximately 70% of yesterday’s bearish movement. Though it should also be noted that the US Dollar Index has also increased during this morning’s session as it did the day before.
Today, investors are expecting the publication of statistics on consumer inflation in the Euro Area. In addition, during the day, traders will follow the meeting of the Economic and Financial Affairs Council of the European Union, as well as the US’s Consumer Sentiment Figures due to be released later tonight.
Resistance levels: 1.2000, 1.2022, 1.2070, 1.2100.
Support levels: 1.1950, 1.1900, 1.1834, 1.1800.