It is already clear that the decline in the US dollar, which began immediately after the victory of Joe Biden in the US presidential election, as well as after the news about the successful trial of the COVID-19 vaccine, has come to naught. Investors and traders have enough problems due to the new wave of the coronavirus pandemic and restrictive measures that are now in effect across Europe, which increases the reluctance of investors to take risks and bet on the growth of the euro and the British pound.
The latest statements by the President of the European Central Bank on economic support programs also did not become something new, which did not add to the optimism, and the weak inflation that we saw today in Germany once again proves the weak position of the Eurozone economy in the face of future problems.
Will the European Central Bank will resort to lowering rates? It remains a mystery. However, while this option is possible, we will not see a major increase in the European currency.
The US dollar, which is at risk after Joe Biden's victory in the presidential election, has no trump cards, but its status as a safe-haven helps it cope with these problems. There is only one conclusion - the EURUSD pair will continue to be in the side channel and is unlikely to get above the 20th figure until the end of the year.
Returning to today's report on German inflation, its weak growth creates quite clear prerequisites for the fact that the economy continues to slow down, especially in the conditions of a partial lockdown, which has been in effect since the beginning of November this year.
According to the statistics agency Destatis, the final consumer price index in Germany in October 2020 increased by only 0.1% and decreased by 0.2% year-on-year. If we take the consumer price index harmonized according to EU standards, it decreased by 0.5% per annum. The only adequate explanation for why prices are falling that economists can grasp is the summer decision to lower VAT. Both values coincided with the forecasts of the surveyed economists. As for certain categories, prices for goods decreased by 1.5% compared to October last year. Energy prices fell by 6.8%. Food prices increased by 1.4% over the year.
The report on industrial production in the Eurozone also did not please, further driving traders into despondency. The good activity of the industrial sector in the early autumn of this year did not contribute to the improvement of the indicator, which was still in positive territory in August.
According to the EU statistics agency, industrial production in the Eurozone in September this year fell immediately by 0.4%, after an increase of 0.6% in August this year. Compared to the same period in 2019, production decreased by 6.8%. The main surprise was caused by a decline in production in the manufacturing industry and in the utility sector, which decreased by 0.4%, contrary to expectations for growth of 0.8%.
As for the technical picture of the EURUSD pair, it remained unchanged compared to the morning forecast, as none of the market participants is making any special efforts to determine the further direction of the pair. The further direction depends on the support of 1.1745, which buyers managed to protect during the first wave of testing. The strong fundamental statistics that are expected today for the US economy may strengthen the position of the US dollar and lead to a return of pressure on the euro. A break of 1.1745 will lead to a new wave of sell-off of risky assets with an exit to the base of the 17th figure and an update to the minimum of 1.1655. It will be possible to speak about the resumption of the euro growth only after the consolidation above the resistance of the 18th figure, which will lead to an upward correction to the area of the maximum of 1.1860, and the further target will be the weekly resistance of 1.1915.
GBP
The British pound and its traders were dissatisfied with the figures they saw today on the UK GDP growth rate for the 3rd quarter of this year. And while the data was quite impressive, especially after the sharp collapse in Q2 due to the coronavirus pandemic, clear problems remain in the economy. The unresolved situation around the Brexit trade agreement and the new partial lockdown of the British economy will not add to optimism.
Problems remain in the hotel and restaurant business, which had no time to recover from the spring blow, again began to experience serious problems that are directly related to the order of the authorities and measures to combat COVID-19. The slowdown in the British economy in September this year, contrary to all forecasts of economists, also indicates the continuation of bad momentum in October and November this year.
According to the National Bureau of Statistics, in the 3rd quarter of 2020, compared to the 2nd quarter, UK GDP grew by 15.5%. Compared to the same period last year, the economy sank by 9.6%. And even if this is only the first estimate, it is unlikely to be significantly adjusted in the future, because it is already clear that the data did not even reach the average forecast of economists.
As noted in the report, the major recovery was mainly due to the recovery in consumer spending, which gave the economy 18%, while investment growth was twice as slow, indicating that the outlook remains uncertain.
As for the technical picture of the GBPUSD pair, further downward movement after breaking the support of 1.3170 opens a direct path for the bears to the base of the 31st figure, the break of which will lead to a larger decline in the trading instrument in the area of 1.3030 and 1.2920. But it is too early to say goodbye to the bullish trend observed since the beginning of November this year. If buyers of the trading instrument manage to close today above the resistance of 1.3170, demand for the British pound may return, which will open a direct road to the highs of 1.3250 and 1.3310.