FX.co ★ Hot forecast for 02/02/2021

If you look at the macroeconomic data that was published yesterday, the rather impressive weakening of the euro is genuinely surprising. However, the reasons for the euro's decline are still related to statistics. The one that is about to be published. The thing is that Eurostat revised its inflation forecasts, the data which will be released on Wednesday. A deflation was already assumed even before the European trading session opened, and this has been going on for five months, but now they expect inflation. Although it is not that great, just by around 0.1%. And although this is not a lot, the very prospect of ending deflation was encouraging. But yesterday, the forecast was revised upwards when the European trading session opened, and now inflation is expected to reach 0.3%. And this is according to the most conservative estimates. The estimate speaks of an increase of up to 0.5%. But even if you focus on an estimate of 0.3%, it is still a lot. Do not forget that the rate of decline in consumer prices reached -0.3% back in December. So they are trying to convince investors that consumer prices will skyrocket. This is a very significant leap for Europe. At the same time, it was argued for a long time that inflation would grow gradually and smoothly. And here it turns out that the forecasts were promptly revised, and even in the direction of excessive optimism. This is what scared the investors, who, with their sales of the euro, expressed their skepticism about the realism of such forecasts.

If we talk about statistics, then it was in many ways moderately positive. First, the unemployment rate in Europe, as expected, remained unchanged, which could in no way affect the market dynamics. Secondly, the final data on the PMI in the manufacturing sector came out better than expected. A preliminary estimate showed that the index fell from 55.2 to 54.7. In fact, it dropped to 54.8. The difference is not big, and all the same, we are talking about a decline. However, this is still slightly better than the forecast.

Unemployment rate (Europe):

The index of business activity in the United States also turned out to be slightly better than the preliminary estimate. Only in contrast to Europe, this is not a decline, but an increase in the index. The preliminary estimate showed an increase from 57.1 to 59.1, but it turned out that it rose to 59.2. At the same time, the index rose to its highest value over the past six-plus years. But regardless, such reports did not affect the market in any way, since the euro stopped weakening before the index of business activity in the manufacturing sector was published.

Manufacturing PMI (United States):

We probably won't see a rebound today, and instead the euro might weaken. It's all about the first estimate of the euro area's GDP for the fourth quarter, which may well show an acceleration in the rate of economic decline from -4.3% to -6.0%. Most important in this situation is that similar data for the United States showed a slowdown in the rate of economic decline. It turns out that the American economy is gradually recovering, while the European one only demonstrates the further aggravation of the crisis.

GDP growth rates (Europe):

Yesterday, the EUR/USD pair showed interest in an active decline, and as a result, the quote approached the support point in the form of 1.2050, where a slowdown occurred on a natural basis.

The general market dynamics is showing an acceleration, which is confirmed by both impulse candles in the market and speculative activity.

If we proceed from the quote's current location, then we see a slight pullback from the support point at 1.2050, which in this case resembles the process of regrouping trade forces.

Considering the trading chart in general terms, the daily period, there is still a medium-term upward trend just like before, where a corrective move emerged from the high of 1.2349.

We can assume that being able to keep the price below 1.2050 will increase the volume of short positions in the euro, which will lead to a succeeding decline towards the psychological level of 1.2000.

From the point of view of a complex indicator analysis, we see that the indicators of technical instruments on the minute and hour intervals signal a sell, due to price fluctuations within the support point. The daily period, as before, works on a correctional course, signaling a sell.