4-hour timeframe
Average volatility over the past five days: 73p (average).
The EUR/USD pair spent the last trading day of the week in multidirectional trading. If the downward movement that had begun the day before had continued in the first half of the day, then a new round of upward correction began in the second. The downward trend persists for the euro/dollar pair. Trading is calm, therefore it is too early to talk about the second wave of panic. At the same time, it seems that the pair decided to implement the scenario with forming a downward trend, rather than a long consolidation in a narrow price range. The April 6 lows were updated today. At the moment, the quotes of the pair have grown to the critical line, a rebound from which can provoke a resumption of the downward movement. In principle, the movement against the trend is characteristic of the last day of the week; we wrote about this in previous reviews. It is explained by the desire of traders to take part of the profits before the weekend. However, there have been several important macroeconomic publications today, so should we understand why the correction began today? Market participants have finally begun to pay attention to macroeconomic statistics for purely technical factors.
Judging by yesterday, traders continue to ignore any macroeconomic reports. The US dollar showed growth at the report on applications for unemployment benefits. This morning, IFO's insignificant and unnecessary reports on economic expectations, assessment of the current situation and business optimism in Germany were published. All three indicators were weaker than forecasts and previous values. However, traders did not expect this data on Friday, April 24. They were waiting for the US report on durable goods orders. This indicator has long been considered quite important for the US economy (it is not published in other countries). Durable goods are goods with a service life of at least three years. That is, household appliances, cars, machine tools, equipment and so on. Obviously, these products are quite expensive, therefore they require serious investments for their production, and consumers need serious investments for their purchase. The main indicator, which includes all categories of goods, decreased by 14.4% in March with a forecast of -11.9%. Orders for goods excluding defense fell even more by 15.8%. But, for example, orders excluding transport decreased by only 0.2%, and excluding defense and aviation, they showed an increase of 0.1% at forecasted values of -6%. Thus, two of the four indicators were worse than what traders expected, and the other two were better. Accordingly, we cannot make an unambiguous conclusion that statistics from across the ocean are positive or, conversely, negative. Another consumer confidence index from the University of Michigan was published, which slightly exceeded the forecast and March values, amounting to 71.8. However, this report is not included in the category that is considered significant.
Thus, in general, according to today's statistics, it cannot be concluded whether markets have begun to respond to the macroeconomic background. We are inclined to the option that we did not start. If so, then nothing has changed for the euro/dollar currency pair this week. We advise you to continue paying increased attention to technical factors, not trying to guess the pair's reversals, based on news or any fundamental events. The panic seems to have subsided, volatility is normal. However, markets are far from behaving logically. The main concerns relate to the uncontrolled rise in the US currency, based on the faith of investors in this currency alone.
4-hour timeframe
Average volatility over the past five days: 124p (high).
The GBP/USD pair was indistinctly trading on April 24. Corrective movement formally continued and the pound/dollar worked out the critical Kijun-sen line. However, the same has been observed twice already in the last two days. Thus, by and large, the British currency moved sideways, not up. Accordingly, the downward trend is still in the market, as the price is below the Kijun-sen line. Bollinger Bands are also directed downward so far. However, doubts arise about the ability of the bears to continue to move the pair down. UK macroeconomic data turned out to be as disastrous as it was the day before in business activity, as disastrous as in other countries. As we have already said, there is nothing surprising in the extremely low values of almost all indicators for March and, especially, for April. All statistics on the outcome will have to answer only one main question - which country's economy will suffer most from the coronavirus pandemic. And the answer to this question can be extremely important for predicting the further movement of any pair. Retail sales in Britain in March decreased by 5.8% in annual terms and 5.1% in monthly terms. The forecasts were slightly better, but also predicted a rather strong fall. Thus, the statistics did not surprise market participants. The pound within a few hours after the publication of these data went down by around 30 points, which with an average volatility of 124 points looks completely unconvincing. Thus, in the case of the GBP/USD pair, we believe that economic reports did not affect the preferences of traders.
At the same time, it became known that Boris Johnson would return to his duties on Monday, April 27. It is reported that the prime minister completely recovered from the coronavirus and did not use the advice of doctors who required about a month of complete rest for the head of state. It is also reported that Johnson has been working all last week, and will start meeting with ministers next week. The situation with the coronavirus in the UK, judging by the numbers, remains the same, but Health Minister Matt Hancock said that "the country is at its peak" and "social distance works." So far, there is no question of any quarantine cancellation, since it is necessary to achieve a consistent and regular daily reduction in the number of deaths from the epidemic. As well as the number of new cases.
Recommendations for EUR/USD:
For short positions:
The EUR/USD pair began a new round of corrective movement and worked out the Kijun-sen line again on the 4-hour timeframe. Thus, sell orders remain relevant now, but we recommend waiting for a rebound from the Kijun-sen line and selling the euro while aiming for the support level of 1.0714 (to be specified at the beginning of next week).
For long positions:
It is recommended to return to euro purchases only when the price has consolidated above the critical line by small lots with the first goal of the Senkou Span B line
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 with the MACD indicator turning down.
For long positions:
It is recommended to consider new purchases of the GBP/USD pair not before you consolidate the price above the Kijun-sen line in small lots with the first goal of a volatility level of 1.2472.
