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Business / Finance

THE EUR/USD. Abnormal Friday: last trading day of November surprises

RSS feed for Forex Review 29.11.2019 at 16:04

Daily analytical reviews of the Forex market

The Pair Euro-dollar today demonstrates the conflicting price dynamics, despite the relatively strong growth data European inflation. Anomalous, at first glance, the market reaction is due to several factors. After all, today not only the last trading day of the week and month, but "black Friday". Traders reacted to the lack of "righteous anger" against the States from China on weak German data, as well as to the overall strengthening of the dollar. All these circumstances exerted a definite pressure on the pair eur/usd. However, the southern momentum stalled in the area of 1.0980 – the bears have failed to push the level of support 1,0970 (the lower line of the BB indicator on daily chart), but not even approached him. By and large, the pair on the European session remained within the range 1,0970-1,1090, despite significant pressure.

the Friday mood and post-holiday day in the United States overshadowed published today the data on inflation in the Eurozone. However, they should not be ignored – in my opinion, these figures still remember (and time) – especially ahead of the December ECB meeting, which will be held under the chairmanship of Christine Lagarde.

surprisingly, the rate of European inflation today came out above expectations. It was really unexpected, especially after yesterday's release on the inflationary growth in Germany. German figures on a monthly basis, fell to negative, and in annual terms slowed significantly, updating the multi-month lows. However, in the Eurozone the consumer price index rather increased, reaching up to 1.0% from the previous value of 0.8% (forecast growth was at 0.7%). Core inflation also showed a positive trend, rising from 1.1% from 1.3%. This is the best result in the last six months.

By and large, the growth of the European inflation logically fits into the overall fundamental picture of the European macro. Let me remind you that GDP growth in the Eurozone in the third quarter remained at around 1.2%, although most analysts expect the decline of the key indicator to 1.1% or even 1%. Rose, in particular, the German economy. In annual terms, GDP of Germany grew by 1%, although experts expected the reduction by 0.1%. The figure showed the strongest growth dynamics in the last year. The German economy dodged recession, so traders there is some hope for the restoration of pan-European indicators.

And that the European inflation was presented a "gift" in the form of unexpected growth. Why is eur/usd stormed the border of the 11th figure and modestly sits at the base of 10th marks? In my opinion, in terms of poluvagonov shopping day, black Friday and the last trading day of the month you cannot say that the market fully responded to the published release. In conditions of low liquidity, many traders take the profits and not risk to open large positions ahead of the weekend. Therefore, we observed abnormal price movements: on the background of growth of key indicators pair showed the opposite reaction.

in addition, not all the macroeconomic indicators appeared today in the "green zone". For example, data on retail sales in Germany disappointed the market: month-on-month figure was in negative territory (for the first time since July), and in annual terms it slowed to 0.8%, the weakest result since January this year. And although these indicators have little effect on the dynamics of European inflation, the record made me think – how stable CPI in the Eurozone? Whether today's figures are the start of an upward trend or indicator reflected a temporary surge in price pressures?

in addition, the eur/usd rally prevented and the strengthening of the American currency. The dollar index today jumped to six-week highs. Appeared on the market some hope that the latest conflict of a political nature between the United States and China (which was triggered by the signing of the "Hong Kong laws") will not affect the trade negotiations. And although China promised to take "tough response" in response to the adoption of these bills, many experts expressed confidence that these measures will not have any relation to trade negotiations. China's economy suffers from a global conflict (the latest data on GDP growth of the country, eloquently testify to this), so Beijing is unlikely to "slam the door", leaving the negotiating table. In other words, the probability of the conclusion of the first phase of trade agreements is still there, and this fact provides indirect support to the greenback.

Thus, at the end of the trading week the pair eur/usd remained within the range 1,0970-1,1090 – although today had all the prerequisites to the fact that the price will break the upper boundary of the price range. In my opinion, the market is still played today published figures – traders undeservedly ignored them, especially in light of the ambiguous relationship of many members of the ECB to further monetary policy easing.

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