You can say as much as you like that the market began to prepare in advance for today's Federal Open Market Committee meeting, and that this was the reason why the dollar will continue to weaken. But if you look at everything a little more closely, it becomes obvious that the market behaved strictly in accordance with published macroeconomic data yesterday. Perhaps investors still have the upcoming meeting in mind. But this was clearly not the determining factor. The best thing that it could do was to strengthen the negative consequences of the market's reaction to open vacancy data. But let's figure it out in order.
I must admit that the day began with the weakening of the single European currency. THe euro began to get cheaper even before the publication of the third European GDP estimate in the first quarter. And this is not surprising, since it was expected that the pace of decline would be as much as 3.3%. Whereas the previous estimate showed a decline of 3.2%. So the expectations were purely negative. And it is clear that against this background, the single European currency was gradually declining. But as soon as the data were published, this process instantly stopped, after which the gradual strengthening of the single European currency began. It turned out that the decline in GDP in Europe amounted to 3.1%. That is, not just better than forecasts, but even better than the previous estimate. So the growth of the single European currency is to some extent justified.
GDP (Europe):
But with the opening of the US session, the process of weakening the dollar significantly accelerated. This happened just an hour before the publication of JOLTS data on the number of open vacancies. After the release of the data, the pace of the dollar's fall slowed down, and we can say that the market began to consolidate. So the market reacted precisely to macroeconomic statistics. The number of these open vacancies decreased from 6,011,000 to 5,046,000, and 5,300,000 were predicted. The market's reaction finally removed the question about the attitude of investors to the content of the report by the United States Department of Labor. They don't really believe it. After all, based on the content of the report, the decrease in the number of open vacancies may be caused by the fact that employers have found suitable employees for vacant jobs. However, the content of the report contradicts not only all other data on the labor market, but even common sense. Anyway, the crisis is not over yet. We can't even talk about the end of the economic downturn yet. So we don't have to talk about the beginning of recovery yet. In other words, investors assume that the reduction in the number of open vacancies is caused by the banal bankruptcy of many small and medium-sized entrepreneurs. This means that vacancies are reduced due to the physical reduction of jobs. In other words, this is a purely negative factor.
Number of open vacancies JOLTS (United States):
Without any doubt, the FOMC meeting is the main event of the day. But before that, I would pay attention to inflation in the United States, which should fall from 0.3% to 0.2%. Given that this is one of the main parameters taken into account when making decisions about monetary policy, it will certainly have some impact. And rather negative. After all, slowing inflation also means lowering interest rates. Such rumors, by the way, go. Adding to the nervousness is the fact that inflation is published just a few hours before the FOMC meeting.
Inflation (United States):
But what really matters is not the meeting itself, but Fed Chairman Jerome Powell's subsequent press conference. Although there are various panics, as well as rumors that the Fed could lower the refinancing rate, these are just emotions. Fed representatives have repeatedly stated that they do not consider reducing interest rates to negative values, since this measure is not effective. At least there is no actual evidence that such a step can have a positive impact. Moreover, Powell's subsequent speech may present an unexpected surprise. The fact is that the current economic situation requires either a reduction in interest rates, or a massive injection of money into the economy. And it seems like we can assume that a new quantitative easing will be announced. However, Congress and the Senate quickly adopted a plan to stimulate the economy by at least $2 trillion. Money for which the Fed has allocated. This is the same quantitative easing. It has already been implemented. So Powell may well say that no hasty steps will be taken, as the regulator intends to first assess the effectiveness of measures already taken. This means that the parameters of monetary policy will remain unchanged against the background of clear easing by the European Central Bank. So it is highly likely for the dollar to rapidly strengthen during Powell's speech.
From the point of view of technical analysis, we have another round of long positions, during which the quote managed to reach the variable level of 1.1240 as a pivot point, returning the quote to last week's local high. It is worth considering that we are dealing with an inertial move that counts down from May 26, the total distance traveled is more than 500 points.
In terms of a general review of the trading chart, the daily period, it can be noted that the quote is in close proximity with the March 9 high, which means that the area where trading forces interact at 1.1440 / 1.1500 has already begun to work.
It can be assumed that in the price passes the previous week's high at 1.1383, one should not exclude a further inertial move in the direction of the 1.1440/1.1500 range, but it should be taken into account that there is already a characteristic overbought, and the closer the price approaches the interaction area between the trading forces, the stronger the desire to sell.
From the point of view of a comprehensive indicator analysis, we see that the indicators of technical instruments relative to the hour and day periods signal a purchase due to a rapid inertial course.
