At first glance, everything was quite logical and clear yesterday. At first, the single European currency slightly rose on expectations. Then the euro went down, as it is already under the pressure of real facts. However, this feeling is deceptive, and in fact all the movements were purely speculative, since they are banal in time and do not relate to certain events.
The euro began to steadily rise even before the results of the Board meeting of the European Central Bank were announced. Given the fact that nothing was expected from this very meeting at all, this is clearly a speculative movement. That is, moving in the opposite direction from expectations. The market did not just expect the ECB to make at least some changes in monetary policy. Investors were confident that ECB President Christine Lagarde would mention obligated phrases, and with respect to future plans and into everything that was vague. And this is, at best, a neutral factor. But in a good way - and also completely negative. But the euro was growing. We observed a speculative movement in the opposite direction from expectations, with an eye to the subsequent reverse movement. Everyone just wanted to sell the euro at a higher price.
Moreover, there was a reason for the reverse movement in the form of US data, which actually turned out to be significantly better than forecasts. Only data on initial applications for unemployment benefits turned out to be worse. Their number decreased from 1,310,000 to 1,300,000, while expectations were at a decrease to 1,290,000. The number of repeated applications fell from 1,776,000 to 1,733,800. Moreover, the rate of decline in retail sales by -5.6% was replaced by an increase of 1.1%. But it was predicted that the rate of decline would slow down to -3.0%. So the situation in the US economy turned out to be somewhat better than predicted, which is an exceptionally positive factor for the dollar, and it seems one should not be surprised by the subsequent weakening of the euro.
Repeated applications for unemployment benefits (United States):
However, the trick is that market movements did not coincide with these events in any way. Yes, the euro started to grow before the ECB meeting. But it began to decline as much as six hours later, following the release of US data. As if everyone did not immediately notice these very macroeconomic data. And oddly enough, this suggests how events will develop today. If you look more closely, you can see that the euro has been growing quite actively recently, which means it is overbought. Thus, today's inflation data, which should show an acceleration in consumer price growth from 0.1% to 0.3%, will only briefly lead to the euro's growth. It has almost nowhere to grow. Moreover, the market has long been ready for an increase in inflation in Europe.
Inflation (Europe):
The release of good data is expected in the United States. In particular, the volume of construction of new homes should increase by 12.9%, and the number of issued construction permits by another 2.5%. In general, the euro is speculatively overheated, and we should brace for it to fall. Although at first it will even be able to show some growth.
Volume of construction of new homes (United States):
From the point of view of technical analysis, we see speculative activity that caused the current fluctuations. Analyzing the price jumps in detail, you can see that the role of resistance was once again assumed by the area of 1.1440/1.1450, where market participants systematically consolidated their trading positions and as a fact there was a rebound in the opposite direction. The recovery of short positions led to updating the daily low.
Considering the trading schedule in general terms (daily period), the overbought European currency is consolidated due to quotes fluctuating within the current year's high.
We can assume that the Europe inflation data will locally support the euro, directing it towards the value of 1.1415, but the downward interest will remain, where it is possible that a path will open towards the values of 1.1350-1.1300 when the price is consolidated below 1.1370.
From the point of view of complex indicator analysis, we see that the indicators of technical instruments on the minute and hour periods signal a sale by consolidating the price at the previous day's low. The daily period, as before, signals a purchase, reflecting the general direction.