FX.co ★ Trading recommendations for starters of EUR/USD and GBP/USD on May 21, 2021

Here's the details of the economic calendar for May 20:

Yesterday, Europe released its data on the volume of production in the construction sector for March, where there was a forecasted acceleration in the decline from -5.8% to -7.9%. But as a result, traders saw a sharp recovery from -5.4 % to + 18.3% instead of a decline.

It is noteworthy that the data presented above is year-on-year, and we clearly remember what happened in Europe in March 2020.

Therefore, we are faced with a low base effect again, when the impressive growth rate of an economic indicator is explained by its extremely low starting indicator.

The report on the volume of production in the construction sector is prepared by the statistical office of the EU and it reflects the volume of production in the public and private construction sector, which directly indicates the flow of investments attracted in this area.

An increase in this indicator may lead to the euro's strengthening, while a decrease leads to weakening.

In this case, such a sharp growth had a positive effect on the rate of the Euro against the US dollar.

During the US trading session, America published its weekly data on applications for unemployment benefits, where the volume was expected to fall, but as a result, there was an increase in the overall indicator.

• Volume of repeated applications for benefits rose from 3,640 thousand to 3,751 thousand.
• Volume of initial applications for benefits fell from 478 thousand to 444 thousand.

Applications reflect the number of citizens who are not currently working and receiving unemployment benefits. This indicator is considered the state of the labor market, where the growth of the indicator negatively affects the level of consumption and economic growth.

To simply put it, an increase in the number of applications leads to a weakening of the national currency, while a decrease leads to strengthening.

In our case, the overall indicator for two parameters reflected the growth in the volume of applications for benefits, which ultimately negatively affected the US dollar.

Analysis of trading charts from May 20:

The EUR/USD pair reached the support area of 1.2165/1.2180 during today's Asian session, where there was a decline in the volume of short positions (sell positions) and an increase in the volume of long positions (buy positions). This resulted in a price rebound.

Trading recommendations from May 20 considered the scenario of a price rebound from the pivot point, so holding the price above the level of 1.2200 pointed us to long positions.

In turn, the British currency reached the forecasted pivot point of 1.4100 during the correctional course, where there was a stop on a regular basis and as a result, an increase in the volume of long positions.

Trading recommendations from May 20 considered the scenario of a price rebound from the pivot point, where buy positions were placed around the level of 1.4150, which eventually brought profit.

Trading recommendation for EUR/USD and GBP/USD on May 21, 2021

Today, the UK has already released its data on retail trades, where the indicator rose from 7.2% to 42.4% year-on-year.

The acceleration is impressive, but it is warned not to get very optimistic due to the low base effect.

In any case, traders reacted positively to the statistics from the UK.

Moreover, almost all major trading areas will publish PMI's preliminary data, which may give the market a fair volatility.

8:00 Universal time - Europe

• The Markit index of business activity in the services sector for May may grow from 50.5 points to 52.3 points.
• The Markit index of business activity in the manufacturing sector for May may decline from 62.9 points to 62.5 points.

8:30 Universal time - Britain

• The Markit index of business activity in the services sector for May may rise from 61 points to 62 points.

The Service PMI, prepared by the Royal Institution of Purchasing and Supply in conjunction with Markit Economics, is an indicator of the economic situation in the UK services sector. It provides a general overview of the sales and employment status of the sector. The growth of the index may lead to the strengthening of the national currency – GBP.

• The Markit PMI manufacturing for May may fall from 60.9 points to 60.0 points.

The Purchasing Managers' Business Activity Index (PMI) for Manufacturing is published by the Royal Institution of Purchasing and Supply in partnership with Markit Economics and measures the business climate and conditions in the manufacturing sector. The growth of the index may lead to the strengthening of the national currency – GBP.

13:45 Universal time - United States

A similar index of business activity will be published in America during the US trading session.

• The Markit index of business activity in the services sector for May may decline from 64.7 points to 64.5 points.
• The Markit index of business activity in the manufacturing sector may decline from 60.2 points to 60.5 points in May

Looking at the EUR/USD trading chart, it can be seen that the price is almost done recovering from the recent decline, where the quote has already approached the variable resistance of 1.2245.

In order to keep the upward trend, the quote needs to break through the level of 1.2250. Otherwise, a natural reduction in the volume of long positions can be expected, following the example of May 19.

As for the GBP/USD trading chart, it shows that the quote has returned to the resistance area of the medium-term trend of 1.4180/1.4224. In order to maintain the upward cycle, the quote needs to stay above the level of 1.4224 for a four-hour period; or else, there may be a repetition of the natural basis of the past associated with this area.