Market Analysis – EURUSD
The EURUSD this morning is not showing any major direction during the Asian session, currently trading at an exchange rate of 1.2192, which is a slight decline. The movement is minimal as the market has been left feeling anxious after Friday’s price action and awaits further price drivers. Friday saw a strong downward trend against the Euro which was very quickly reversed as the market formed a 100% price correction. The price movement was rejected while the exchange rate returned to the previous rate prior to the bearish trend and has hovered around this price up until now. For this reason, the market is looking for a clear movement and drive in the market to position their trades accordingly.
Comments from US Treasury Secretary, Janet Yellen, remain in the spotlight of investors. Yesterday, she spoke in the House of Representatives of the American Congress and reaffirmed that the rise in inflation, observed now, was a temporary phenomenon and it could last from a few more months until the end of this year. This was negatively received by many traders as they had previously hoped the higher levels of inflation may force the central regulator to raise interest rates. However, comments made by the Secretary have, in a way, backed the Central Bank’s dovish tone. She also noted that the new budget for the 2022 fiscal year, being developed by the administration of President Joe Biden and containing significant costs for economic recovery, could seriously increase public debt, but will not lead to further inflation.
Friday’s April data on the German Import Price Index recorded a rise above market forecasts. It rose to 1.4% MoM instead of the expected 1.1% and reached 10.3% YoY instead of the 10.0% forecasted. Inflationary pressures on the European economy continue to intensify. The index of economic sentiment in the Eurozone countries for May was better than expected. It rose from 110.5 to 114.5 points instead of the expected 112.1 points and reached a three-year high. The greatest rise in business sentiment is seen in the services, retail, and consumer sectors as quarantine restrictions in European countries begin to decline and business activity increases.
Today is a bank holiday in the United States meaning the volume of economic releases, or political events are likely to be minimal. Today we have some minor economical figures due to be released for the Eurozone, but the market is likely going to be paying attention to tomorrow. Tomorrow, the Eurozone is due to release ten economical statistics of which traders are going to be giving extra attention to the German PMI, which is a survey based on purchase managers, as well as the unemployment rate for the European Union. Within regards to the unemployment rate, the anticipated figure is predicted to remain at 8.1%, though the market will be looking to see if the region is able to shock markets now that most economic restrictions have been lifted.
Volatility may increase as we work our way through the week. The market is likely to continue to pester the Federal Reserve during conferences regarding both interest rates, inflation, and monetary policy in general. Lastly the main event of the week is likely to be the US employment figures for May, which is due to be announced this Friday. The previous employment figures illustrated a slowdown in the employment sector and the market is looking to see if this will continue. The unemployment rate is predicted to drop to an 18 month record low of 5.9% compared to a current rate of 6.1% and a Non Farm Payroll figure of 670,000.
Looking at each currency individually we can see the US Dollar is currently illustrating a neutral candlestick on the US Dollar Index as the price is not currently showing neither bullish nor bearish movement. The Euro Currency Index has opened with a bullish market gap after the weekend but has since declined slightly.