I very much doubt that it is a week with high levels of volatility and that prevents us from seeing slips in the currency market, so we can work with trading strategies for calm markets. Technical analysis will take center stage these days and prices are close to important references, making it a key week for equities.
The data from trust in Germany and the USA they can be a good catalyst for short-term markets. In both countries, consumption represents a large part of their GDP, which is why they become very important references.
The main role has been the absence of references on Monday in both the US and the UK. Despite this, the week will be important macroeconomically speaking for the US: Consumer confidence and housing on Tuesday and quarterly GDP, unemployment and oil on Thursday.
It is important that we know and be aware of the hours of the world stock markets to operate well. These are the most relevant macroeconomic references for the rest of the week:
Macroeconomic references of the week.
From this side of the pond, in Europe, we will hardly know important references, only on Friday we will know the CPI data for which a cut is expected. For the confidence data, the increase already experienced in Germany is expected to be repeated in the US, which is good for the short-term equity markets.
The holiday in the US leaves the equity markets with little movement and with relatively low volatility levels, which also directly affects the prices of the foreign exchange market. We see how they have had a secondary role and liquidity well below average. This has an even greater impact on the volume of contracting figures reflected day by day, which has clearly unfavorable evolution in recent weeks:
Admiral Markets Meta Trader 5 EUR / USD Volume
In the medium term we see how the evolution of the dollar continues strong and that continues to strengthen the american economy in the short term, which is good for its equity market and its more direct economy, but very negative for its main economy, exports. We talk about a country that exports low quality raw materials and for this you need to have a weak currency. So it is crucial for them to win those trade battles that continue and will continue to deal with China.
We have seen everywhere the constant concern of the US and China for those battles, but let’s not be deceived, they both ‘need’ each other to clean up all their failures and thus be able to constantly attack the other. It is like the war between the US and Syria, that war will last as long as it can be extended, while the US continues to be the main arms seller to Syria, they are interested in that war being prolonged. Of course, ethics …
The most important levels of support in the short and medium term are easily lost and that generates weakness in the other currencies, as is the case of the euro, who also has his own side.
Of course, it seems that in the short term the measure proposed by some members of the European Union, such as France and Germany, to implement a fund of more than 500,000 million in aid to companies affected by the Covid-19, has sat well to the euro and this has managed to recover short-term positions. However, prices try again to attack the average of 200 sessions and, once again, without success.
Evolution of the euro-dollar exchange.
As we can see in the graph, prices evolve in a formation of possible trend change (Diamond). This is a rather rare chartist figure, but one that is respected quite well. If the objective of such training is finally met, the prices of the euro-dollar should exceed the average of 200 sessions that it has cost so much to overcome in recent months, even years.
We talk about seeing the main pair at 1.1450, which technically may have support, but in the fundamental part I am quite reluctant.
*** Juan Enrique Cadiñanos He is HUB-Manager at Admiral Markets Spain.