At the beginning of the trading session, the euro continued its yesterday’s rise. However, it was a short-term phenomenon. Extremely weak statistical data from Spain has influenced the single currency. The figures partially reflect the current economic situation in Europe.Thus, the Spanish retail sales dropped by 31.6% compared to a decrease of 14.1% in the previous period. Notably, the previous reading was the worst in the recent twenty years. Such a slump in the consumer activity can be compared only with the figures logged during the Great Depression. Moreover, Spain remains firmly stuck in deflation. The consumer price index declined by 1.0% compared to a slide of 0.7% in the previous period. The simultaneous drop in retail sales and consumer prices is really alarming. The ECB may need to implement more radical measures to save the EU economy. Moreover, Spain is the fourth largest eurozone economy. It means that Italy may face the same problems.
At the same time, economic condition of Germany and France is not that awful. Just ahead of the US session, Germany published its preliminary inflation data. Although there are no signs of deflation, the country’s inflation shrank to 0.6% from 0.9% on a yearly basis. On a monthly basis, prices fell by 0.1%. Some analysts suppose that Germany is on the edge of deflation.
Nevertheless, there is only a slight possibility of depreciation of the euro and the pound sterling. Investors are mainly focused on the US statistics that will determine the market sentiment in the second half of the day. However, expectations are rather negative. Thus, according to the second estimate, the US GDP dropped by 4.8% in the first quarter. Notably, the restrictive measures were imposed only at the end of March. In other words, the recession could be the deepest since the Great Depression.
At the same time, the labor market situation is getting worse. The number of the continuous unemployment claims may jump to 26 million. The indicator has been hitting new highs for 8 months already. Consequently, people cannot find new jobs and unemployment is becoming more prolonged. Moreover, the US citizens are still losing their jobs. Thus, the number of the first-time claims could exceed 2 million. The result is still ten times higher than the normal rise in the number of claims.
At the same time, the US durable goods orders are expected to slump to new record lows.
For the recent eight weeks, the euro/dollar pair has been hovering within the range of 1.0775//1.0885//1.1000. However, the pair managed to consolidate above the limit of 1.10 that caused a great discussion about a possible change of the trend.
However, the likelihood is not really strong. On April 24th, the price declined below 1.0775, but the range was not broken. That is why the uptrend is under question.
It is quite possible that the pair will fluctuate between the levels of 1.0990/1.1040. Traders may open local position aimed at the break of the limits. The downtrend is still prevailing.
Thus, sell positions can be opened below 1.0985 with the target at 1.0950-1.0900.
Buy positions can be initiated above 1.1045 with the target at 1.1080.
The pound/dollar pair hit the resistance level of 1.2350 and returned to 1.2204. After that, it rebounded due to a local overheating of short positions.
The quote is likely to fluctuate within the range of 1.2240/1.2295 for some time. Further movement of the pair depends on the levels of consolidation.
In other words, sell positions can be opened below 1.2230 with the targeted level at 1.2150/1.2180.
Buy positions can be opened above 1.2300 with the target at 1.2350.
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