24-hour timeframe
All that we described in the final article for April 3 is more clearly visible on the 24-hour timeframe. If you close your eyes to the abnormal volatility in the last month and a half, you can see the following. The EUR/USD currency pair first went about 700 points up (for no good reason), then 860 points down (an even stronger movement, which means a new trend), and then began to adjust. The first round of correction up – about 500 points, the next round of correction down – about 370 points (at the moment). Thus, volatility decreases and the price returns to the levels at which it was before the panic in all world markets. It is this moment that gives hope for the recovery of the currency market and the return of its participants to normal trading. So far, we believe that the markets continue to recover after the first two strong up and down impulses. And it may take another week or two.
Unfortunately, the situation with "coronavirus" is not improving. According to the latest information, about 1.1 million people are infected worldwide. In the most interesting United States and the European Union, about 278,000 and more than half a million people are infected, respectively. In the United States, more than 1,300 people died from the COVID-2019 virus over the past day, and the total number of victims exceeds 7,000. The situation in the European Union is no better. In Italy, Spain, and France, the problems of the epidemic are most acutely felt. In Italy, the total number of victims is already almost 15,000 (more than other countries in the world), in Spain and France, a total of about 20,000 deaths. Thus, it is still impossible to say that the peak of the epidemic has passed and now things will go on the mend. In Australia, the United States, Israel, and some other developed countries, the development of a vaccine against "coronavirus" was announced. In the United States, the first tests of the vaccine were conducted on mice and scientists called them encouraging. The American vaccine provokes the immune system of mice to produce antibodies to the virus and neutralize its particles. Thus, now the trials, after appropriate permits, will be conducted on volunteers and, if successful, the vaccine can start being produced in a few months. However, given the current state of affairs, "in a few months" does not sound too optimistic. But it's better than nothing.
This week, a large amount of macroeconomic information was published in the European Union and the United States. The news flow started on Tuesday with the report on inflation in the European Union (slowing from 1.2% y/y to 0.7% y/y in March), as well as the unemployment rate in Germany (5.0%). Slowing inflation in the EU is logical since hardly anyone expected that against the background of falling demand for entire categories of goods (in fact, the demand is now only for food and medicine), prices will rise. Next month, inflation may decline even further. But the German unemployment rate, of course, pleased traders, as it did not change in comparison with February. If the German mark still existed, it could expect to grow in a pair with the dollar. On Wednesday, the unemployment rate in the European Union was published, although, for February, it fell from 7.4% to 7.3%. Since this report did not refer to March, it did not arouse any interest among market participants.
Well, on Friday, even though all the main macroeconomic data came from overseas, the European Union also had something to pay attention to. The least interesting report (retail sales for February) showed an increase of 3.0% in annual terms and 0.9% in monthly terms. In general, the business activity indices in the services sectors of the EU countries were even more failed than experts expected, and the indicated preliminary values for March. The Spanish index fell in March from 52.1 to 23.0, Italian – from 52.1 to 17.4, French – from 52.5 to 27.4, German – from 52.5 to 31.7, and the pan-European – from 52.6 to 26.4. Without going into details, we can say that over the past 12 years, there have never been such weak levels of business activity in the services sectors of the EU countries. Even during the mortgage crisis of 2008-2009. This data means that the service sector is completely worth it. Which, in principle, is not surprising, given the widespread quarantine associated with the epidemic. Now we can only wait for GDP data for the first quarter of 2020 or separately for March and estimate the losses of the European and American economies in absolute terms. It looks like the numbers will be extremely low and disappointing. All macroeconomic statistics for the States are reviewed in the article on GBP/USD.
How will all this affect the euro/dollar pair? Unfortunately, it is unlikely that we will see a reflection of macroeconomic statistics on the chart. After a month and a half of ultra-volatile trading, the pair is now at about the same price levels as before the panic. So, nothing has changed in the past month and a half. From a technical point of view, the 24-hour timeframe is currently not suitable for forecasting. Formally, we have a "dead cross" sell signal, and the price is located below the Ichimoku cloud. However, for example, the Bollinger indicator is so wide at this time (the distance between the upper and lower bands is more than 800 points) that it allows almost any variants of price movement. In this review, we said that there is a high probability that a new round of upward correction that will start at this time. On a 24-hour chart, this option is not obvious. All target levels (support/resistance) are located far away and are unlikely to be worked out, given the gradually decreasing volatility. The MACD indicator regularly changes the direction of movement but is very late with these reversals relative to price reversals. Thus, we recommend paying more attention to the 4-hour timeframe, where the picture is more suitable for analysis and forecasting.
The last thing I would like to note is the growth of black gold quotes at the end of the week. WTI crude rose to $28.79 per barrel, while Brent crude rose to $34.90 per barrel. The gradual recovery of the oil market is also a good signal for traders.
Trading recommendations:
On the 24-hour timeframe, the euro/dollar pair can be said to have resumed its downward movement after a strong correction to the Kijun-sen line. However, we believe that it is best to trade now using the 4-hour timeframe analysis since there is a high probability of an upward correction. Sell positions are still more relevant now since there is no sign of the beginning of a corrective movement at the moment.
