The euro-dollar pair continues to trade in the flat: traders have not left the eighth figure since last week, and more precisely, since April 16. Dollar bulls regularly take the initiative, but cannot gain a foothold below 1.0850. This fact makes it possible for buyers to control the situation and restrain the onslaught of EUR/USD sellers.
Recent events in the oil market have not been able to provide significant support to the US currency, especially since the June futures for WTI and Brent are in positive territory. The oil market's anti-record could not provoke a rally in the dollar, although it dominated almost all of the dollar pairs at the beginning of the week. The EUR/USD pair was no exception here - since it descended to the bottom of the 8th figure, the bears updated the local low and they clearly intended to test the seventh price level. But in the end, they did not have enough information support - the fundamental background for the greenback is quite contradictory, while the situation in the foreign exchange market is changing with kaleidoscopic speed. For example, at the time of writing, June Brent futures were trading at $22 (although in the morning, there was a price low that was last recorded in 1999, when the price fell below $16), and WTI recovered to $15 (whereas it fell to $10 in the morning) . Of course, it's too early to talk about any turning point, but the dollar has currently lost its advantage.
In addition, anti-risk sentiment declined in the foreign exchange market due to other fundamental factors. First, the spread of coronavirus is gradually slowing down. Doctors of key European countries declare the corresponding trends, albeit warning that it was only possible for the epidemic to recede due to social distancing. It also became known that scientists from around the world are moving forward in developing a vaccine for Covid-19 - for example, if Chinese virologists conduct experiments on monkeys, then British scientists have already begun testing the drug in humans.
Secondly, it became known that tomorrow the leaders of the EU countries during a video conference will consider a plan for the long-term recovery of the community's economy that is worth 2.2 billion euros, which will complement the emergency program for 540 billion. According to Bloomberg, the corresponding draft agreement has already been prepared. The European currency is still showing very cautious optimism - because tomorrow, most likely, Italy and other South European countries will raise the issue of crown bonds (although EU finance ministers have already rejected this idea). According to unofficial information, European leaders will still come to a compromise tomorrow and agree on the above amount, but until these assumptions become a fact, the single currency is in no hurry to rise.
Macroeconomic reports also provided additional support for the European currency. In particular, the report of the Centre for European Economic Research (ZEW) was better than expected. Positive dynamics were recorded both in Germany and in the entire eurozone, although indicators remained in the negative area. In particular, the German mood index in the business environment reached -28 points, although according to general forecasts it should have been much lower at around -40 points.
Thus, in anticipation of tomorrow, you should not believe the price dynamics of EUR/USD. First of all, an online summit of EU leaders will take place tomorrow, and secondly, important macroeconomic reports will be published. We learn more about PMI indices for key countries in Europe. If these releases follow the ZEW trajectory (i.e. a slight recovery), then the euro will receive significant support. Although in general, analysts expect negative dynamics - especially in the provision of services. As for the manufacturing sector, a slowdown is also forecasted here relative to the previous month. The fact of a negative trend can strengthen bearish sentiment.
The US will also release data by tomorrow. Here, the focus will be on the growth rate of the number of applications for unemployment benefits. Let me remind you that this indicator has been growing at an enormous rate for several weeks in a row. This figure jumped to three million on March 26, then it rose to almost seven million, afterwards, it reached 6.6 million the week before last. Last week, this indicator was also supposed to exceed the 6-million mark. But it did not do so, instead it reached 5.2 million. And although such a result is not a reason to be optimistic, nevertheless, dollar bulls retreated from the positions they won. In this case, millions of values are no longer frightening - the trend itself is important. According to the preliminary forecast, 4.5 million applications are expected this week. If the declared figures coincide with the real ones, then we can already talk about the downward trend. This fact could put pressure on the US currency, since the dollar has recently been used as the main defensive asset, and its well-being does not depend on the dynamics of key economic indicators, but on the level of anti-risk sentiment in the market.
The index of business activity in the US manufacturing sector is another important indicator on Thursday. It crossed the 50-point border for the first time in many years, dropping to 48 points in March. A further decline of up to 36 points is also expected in April. Bears of the EUR/USD pair will receive support only if the indicator shows a weaker result.
To summarize, it should be recalled once again that the EUR/USD bears have repeatedly tried to gain a foothold below the 1.0850 mark over the past week. But buyers seized the initiative every time. Sellers need a more powerful occasion to pull the price into the area of the seventh figure. EUR/USD bulls need a similar occasion (one that is positive) in order to return to the ninth price level. Therefore, trading this pair in the run-up to tomorrow is at least risky - the pendulum can swing in one direction on Thursday, determining the medium-term vector of the pair's movement.
