As we have already mentioned, today, the US dollar has many reasons to rise. At the same time, the European currencies began falling even before the publication of the eurozone retail sales and unemployment rate data.
There is no wonder as economists had expected a slide of 1.2% in the eurozone retail sales. In the previous period, the indicator inched up by 0.6%. Notably, the decline was expected to occur in the same month when inflation finally replaced deflation. Thus, even a short-lived and insignificant rise in prices immediately led to a slump in consumer demand. It means that despite an increase in output prices, companies’ profit is still falling.
However, the real data turned out to be below even the worst predictions. The eurozone retail sales tumbled by 6.4% on a yearly basis. The reading for the previous period was upwardly revised from a rise of 0.6% to a jump of 0.9%. However, this will hardly improve the situation.
At the moment, investors should be extremely cautious as risks of deflation have skyrocketed. Moreover, the second wave of deflation could be significantly stronger than the first one, which took place in the second half of 2020. The most important thing is that the ECB will never tighten the monetary policy against such a background. This may happen only in several years.
At the same time, the eurozone unemployment rate remained unchanged. However, economists had been sure that the indicator would climb to 8.4%. Nevertheless, judging by the retail sales report, the unemployment rate is likely to rise in the near future.
As usually on Thursday, the US will disclose its unemployment claims figures. The data will be published ahead of the official report of the US Labor Department that is slated for release on Friday. Analysts suppose that the unemployment claims data will prove the labor market gradual recovery. If the predictions come true, the report prepared by the US Labor Department will boost the US dollar.
Let’s take a look at the trading charts. After short-lived stagnation, the euro/dollar pair began dropping. As a result, yesterday, the euro lost about 50 pips.
In fact, market participants are still focused on the correctional movement from the peak of the mid-term trend.
Analyzing the current chart, we can see that sellers broke yesterday's support level of 1.2045. Now, the target is located at the psychological level of 1.2000.
Although the pound/dollar pair showed a local decline yesterday, it is still hovering near the psychological level of 1.3950, trying to break it as resistance.
On the trading chart, we can see that no significant changes occurred during the last 35 hours. The price is still fluctuating near the psychological level, trying to break it downwardly.
If the price fixes below 1.3920, it may slide to the local low of 1.3850 logged on March 2. If the price fixes below 1.3850, it will have all chances to reach the level of 1.3750.
According to the alternative scenario, the pair may consolidate above 1.4050 on the four-hour chart to continue the uptrend.
FX Analytics - www.instaforex.com/forex_analytics
Forex Calendar - www.instaforex.com/forex_calendar
Forex TV from InstaForex - www.instaforex.com/instaforex_tv
Forex charts - www.instaforex.com/charts
Instant account opening - www.instaforex.com/fast_open_live_account
Forex Trading Contests - www.instaforex.com/forex_contests
List of official InstaForex blogs:
#forex_news #european_session #instaforex_tv