4-hour timeframe
Average volatility over the past five days: 74p (average).
The EUR/USD currency pair was quite active on Thursday. The total volatility of the day was almost 100 points a few hours before it ended. Thus, we can say that traders did not sit on the fence today, but actively traded. We can only figure out what caused this activity and what awaits the pair in the future.
Let's start with the fact that a sharp reversal of the pair up occurred in the second half of the day. In the first half, the euro/dollar pair continued to adhere to the downward trend that was formed after the pair's side channel quotes were released. The European Union published data on business activity in the services and manufacturing sectors in the morning. Although these figures were only preliminary, we believe that they are still important, since the preliminary and final values are rarely very different. Business activity in the German manufacturing sector fell to 34.4 points, while it dropped to 15.9 in the service sector. In France, business activity in the manufacturing sector fell to 31.5 points, and in services - to 10.4. In the EU as a whole, business activity in the manufacturing sector fell to 33.6, and in the service sector – to 11.7. There have never been such figures of business activity in either the first sector or the second. Therefore, this package of macroeconomic statistics cannot be called bad. It's just a failure and even worse. Although what else could you expect from these reports in the midst of the crisis? The service sector is now closed, almost completely. Closed shops, travel agencies, gyms, cinemas, shopping centers - everything is closed. So the drop in business activity to almost to zero is completely logical. Things are a little better when it comes to manufacturing, as large-scale production, factories continue to work. Although if it comes to the production of essential goods like food and medicine, then everything is fine, but all other industries, if they continue to work, are reduced as much as possible. Who, for example, is currently buying cars? Or bicycles? Or sofas? Thus, formally, the manufacturing sector remains afloat, but it is unlikely that it will feel much better than the services sector.
Data on applications for unemployment benefits for the week of April 17 was published in the United States in the afternoon, which everyone was waiting for. Almost no one was surprised by the next 4.4 million primary applications and 16 million secondary applications. Recall that the first indicator takes into account only new applications, and the second-repeated applications from citizens who already receive unemployment benefits. Thus, the second indicator even more accurately reflects the current situation. However, the difference between the first and second indicators is now about ten million (the number of initial applications reached 26 million over the past five weeks). So the question is: have these 10 million found jobs in recent weeks? Or simply did not apply for the benefit again? Or were they denied benefits? In any case, the unemployment situation in the United States remains catastrophic. We believe that this report is associated with the fall of the US currency in the second half of the day. Data on US business activity, which also did not particularly please traders, was released. The value decreased to 27 in the service sector, and to 36.9 in the production sector. A little better than Europe, but generally the same. Thus, the US dollar slightly retreated today "thanks to" unemployment statistics. However, we still believe that technical factors now play a more important role than the macroeconomic background. Thus, a price rebound from the Kijun-sen critical line could trigger a resumption of the downward trend.
4-hour timeframe
Average volatility over the past five days: 126p (high).
The GBP/USD currency pair continued to adjust against the downward trend formed recently. The Kijun-sen line worked out, from which at the moment, we can say, there was a rebound. Therefore, the downward trend continues, and the correction may end near this line. In general, trading on the pound/dollar pair was not too volatile today. The pair passed 107 during the day with an average volatility value of 126 points. And this is despite the fact that there was a strong macroeconomic background. But if the movement of the euro/dollar pair still somehow fits into the picture of macroeconomic reports, the British currency again ignored all the data. Business activity in the UK services sector fell to 12.3 points, and in the manufacturing sector - to 32.9. The CBI report on changes in industrial orders was -56 in April. That is, in fact, all three reports were failures, as well as in all other EU countries. At the same time, the British pound was quietly growing against the dollar. It was a correctional growth, but it also makes us understand that traders continue to ignore any incoming information. The pair's activity slightly increased and the pound accelerated its decline when the report on applications for unemployment benefits was published during the US session. However, this acceleration quickly turned into nothing and now there is every chance for the downward movement to resume. Therefore, we stick with our opinion: no macroeconomic reports or fundamental events in the world have any effect on the movement of the currency pair right now. Based on this, we advise you to continue monitoring all news and reports in order to understand at what level this or that economy is. So that when the crisis is over, you can clearly understand to what levels the economy of a country has fallen into and how this could threaten its national currency. In the meantime, we advise you to focus on technical factors that, from our point of view, continue to move all currency pairs.
Recommendations for EUR/USD:
For short positions:
The EUR/USD pair resumed its downward movement on the 4-hour timeframe and immediately began to correct. Thus, sell orders remain relevant now, but we advise you to wait for a rebound from the Kijun-sen line and sell the euro with targets at 1.0747 and 1.0714.
For long positions:
Ii is advised to return to purchases of the euro currency only when the price has been consolidated above the critical line by small lots with the first goal being the volatility level of 1.0895.
Recommendations for GBP/USD:
For short positions:
The pound/dollar continues the upward correction, which could end near the Kijun-sen line. Thus, traders are advised to sell the pound again with targets at 1.2276 and 1.2205 if a rebound occurs from the critical line.
For long positions:
You are advised to consider new purchases of the GBP/USD pair at the earliest when the price has been pinned above the Kijun-sen line in small lots with the first goal of the pivot level 1.2517.
