Wave Analysis by InstaForex

Weak data on the euro area is weighing on the euro



Weak data, including the preliminary, in the production and services sectors of the euro area put pressure on the European currency in the first half of the day. However, there was no significant sale of risky assets. This again indicates that most traders will focus on the Federal Reserve's protocols today.

The British pound collapsed against the US dollar after the release of a weak report on the UK labor market, where there was a significant surge in the number of unemployed.

In Germany, which is the flagship of the European economy, the growth rates of the manufacturing and services sectors have slowed. According to IHS Markit, the purchasing managers' index for the German services sector in February 2018 dropped to 55.3 points versus 57.3 points in January with economists expecting the February value to be at 57.0 points. The PMI for the manufacturing sector fell to 60.3 points from 61.1 points in January.

The preliminary index of supply managers for the manufacturing sector in France also fell in February, reaching 56.1 points compared to 58.4 points in January. Economists had expected a less significant decline, to a level of 58.1 points.

The preliminary index of supply managers for the services sector in France dropped to 57.9 points in February against 59.2 points in January this year. Economists had expected the index to remain unchanged at 59.2 points.

As a result business activity in general for the euro area slowed in February.

According to the report of IHS Markit, the composite index of supply managers of the eurozone in February fell to 57.5 points from 58.8 points in January. It is important to note that a value of above 50 in the index indicates an increase in activity. Economists also expected the decline but only to 58.5 points.

The technical picture in the EURUSD pair remained unchanged compared with the morning forecast. In the event of a decline in the euro after the publication of the Fed's protocols, opening long positions is best after the major support levels of 1.2240 and 1.2200 have been updated.

The British pound, as noted above, fell sharply against the US dollar after it became known that unemployment in the UK in the fourth quarter of 2017 increased.

According to the report of the National Bureau of Statistics, the number of unemployed in the UK increased by 46,000 from October to December 2017. The unemployment rate was at 4.4% while economists expected unemployment to remain unchanged at 4.3%.

Analysis are provided byInstaForex.

ECB report disappointed traders

The European currency remained under pressure in tandem with the US dollar after the release of a weak report on the business climate in Germany. The traders were also not optimistic about the report of the European Central Bank on monetary policy.

According to the Ifo Institute, the German business climate index declined for the month of January this year. This was due to the fact that the expectations of the companies in the manufacturing sector deteriorated for the next six months.

Thus, the business sentiment index in February fell to 115.4 points from 117.6 points in January, while economists had expected the index to reach 117 points for the month of February. Despite this, the market reaction was rather restrained, as many traders were also confident that it would be difficult to surpass the positive sentiment in the German economy observed at the beginning of the year. The additional problems for exporters as reflected in the mood index, created a strong euro, as well as volatile capital markets.



The publication of the minutes from the last meeting of the European Central Bank put pressure on the European currency because many traders and investors did not find the necessary signals from the regulator in connection with the end of the bond redemption program, which is expected to be completed this fall.

Thus, the leaders of the ECB considered the inflation to still be too low as discussed in their January meeting. This suggests that it is too early to change monetary policy.

As for the technical picture of the EURUSD pair, there have been no significant changes compared to the morning forecast. Still, you can expect to form an upward correction towards the end of the week, which may start from the support levels of 1.2260 and 1.2240 in the short term. However, there is no need to exclude today's possibility of sellers updating to a larger support area of 1.2210, where large players will also announce themselves.

The British pound negatively reacted to the UK GDP report and fell in the morning against the US dollar. According to the data, the UK economy in the fourth quarter of 2017 grew weaker than expected.

The report of the National Bureau of Statistics indicates that the UK GDP in the fourth quarter grew only by 0.4% against a preliminary estimate of 0.5%. On an annualized basis, GDP growth in the fourth quarter was revised downward to 1.6% from 2.0%. For the entire 2017, the UK's GDP grew by 1.7%. The main problem for the government remains to be the Brexit, which continues to affect many sectors of the economy.

Analysis are provided byInstaForex.

The ECB (European Central Bank) is disturbed

Eurozone
According to the macroeconomic studies published last week, the expansion period of the eurozone economy that lasted for at least two years is coming to an end.

The evaluation of the ZEW Institute that showed a slowdown in growth rates was confirmed by other studies. All three PMI Markit indices came in worse in January than in December, despite the continuous expansion, the rates are slowing down.

Business climate indices and economic expectations of IFO in February, significantly slowed down, while the expansion phase is completed. Companies are less satisfied with the current business situation, as euphoria is coming to an end, indices are falling across the entire spectrum of the economy specifically in production, wholesale, and construction.



The minutes of January meeting of the ECB was published on Thursday, which contained a number of disturbing statements. In particular, a number of ECB members expressed displeasure with the intention of the US authorities to help administrative measures to reduce the dollar, which, among other things, will be reflected in damage to the European economy and reduce import prices.

The ECB has no unity on the continuation of soft policy since strong economic performance and the growing euro prevents finding the balance.

On Wednesday, inflation data will be published in the euro area for February. While the outlook is negative which could possibly decline to 1.2%, and will help reduce the euro, update the February lows and attempt to reach the support zone at 1.2105 / 40.

United Kingdom
The British pound reacted by reducing the number of negative macroeconomic data. The GDP growth in 4 square meters is composed of 1.4% only, which is lower than expected. The weak data is because of the decline in the consumer demand amid high inflation, which is the minimum result for 5 years.

The increase of commercial investment in 2017 was 2.1% with a forecast of 2.4%, the growth was unexpected to be completely zero in the fourth quarter.



According to CBI, the growth of retail sales continues to slow down, the overall balance has decreased to + 8p against + 12p in January, which indicates a decrease in household incomes.

The pound is under pressure despite the favorable external background. Briefly, the dollar looks stronger but the positive expectations from the Brexit talks on March 22-23 will soon start to have a stronger impact. The formed wedge is threatened with a breakthrough, but its horizontal pattern does not provide an opportunity to indicate the direction. The Support can be found at 1.3855, and the resistance is at 1.4008.

Oil
Oil received a number of positive signals last week, which allowed the quotations to come back to the level of $ 70/ barrel. The first factor was the publication of the report from the US Department of Energy, which states that hydrocarbon reserves were reduced by 1.6 million barrels against a backdrop of sustained production growth. While the markets expect an increase in inventories of 1.9 million barrels.

OPEC was inspired by the success of collaboration intended to change the setup of relations into a long-term direction, for which experts from both OPEC and independent producers are working on. The structure of a new partnership will begin to operate after the expiration of the current agreement in late 2018.

Oil has the potential for further growth, which is supported by the sustained recovery of the world economy against the backdrop of controlling production volumes. If Brent quotes will be able to hold above 64.20 until next week, it is likely to establish a next high close to January's 70.82.

* The presented market analysis is informative and does not constitute a guide to the transaction.

Analysis are provided byInstaForex.

Elliott wave analysis of EUR/NZD for February 27, 2018



Wave summary:
EUR/NZD has rallied nicely and is headed towards the first more substantial resistance near 1.7100. Once this resistance is cleared, the way higher to 1.7470 and 1.7777 is open.

Support is now seen at 1.6850, and the important support is seen at 1.6780.

R3: 1.7094
R2: 1.6990
R1: 1.6937
Pivot: 1.6887
S1: 1.6850
S2: 1.6780
S3: 1.6723

Trading recommendation:
We are long EUR from 1.6790, and we will move our stop higher to 1.6775.

Analysis are provided byInstaForex.

Data on the US economy supported the US dollar



Data on inflation in Germany did not affect the quotations of the European currency, as attention was solely focused on the speech of the chairman of the Federal Reserve.

According to the statistics agency, Germany's preliminary consumer price index rose 0.5% in February from January, while the index grew 1.4% compared to the same period in 2017. These data almost completely coincided with the expectations of experts who projected an increase of 0.5% and 1.5% respectively.

The base index, which does not take into account the volatile categories of goods, also increased by 0.5% in February and by 1.2% compared to February 2017. Given the fact that the data was in line with economists' forecasts, recent statements by ECB representatives that the stance of monetary policy will remain unchanged, along with the confirmation of such intent by the president of the central bank, Mario Draghi, it speaks of the weak prospects for the growth of the euro in the early spring of this year .

The data pointing to a drop in demand for goods with a long service life, passed for investors without a trace. According to the report of the US Department of Commerce, orders for durable goods in January this year decreased by 3.7% compared with the previous month. Economists had expected the decline to be 1.6%. As noted in the report, the main drop was mainly due to a 10% decrease in orders for transportation equipment. New orders for capital goods fell by 0.2%. The fall of this indicator is the first "call" that consumers are starting to save more.

Housing prices in the US in December of last year continued to grow. This report was presented by CoreLogic/Case-Shiller. Thus, the national housing price index in December grew by 6.3% compared to the same period last year. As experts say, the current sharp rise in prices already exceeds the growth of salaries in the US, which can affect inflation this year and slow it down a little.

Good data on consumer confidence in the US only supported the US dollar, which began its rapid growth after the speech of the new head of the Fed, Jerome Powell.

According to the Conference Board, the consumer confidence index in February this year reached 130.8 points against 124.3 points in January. Economists had expected the index in February to be 127.0 points. The report also indicates that the volatility of the stock market did not affect consumers who showed higher optimism about short-term prospects.

Analysis are provided byInstaForex.

Inflation in the euro area declines for the third consecutive month

All the attention of traders was focused on the data on inflation in the euro area which disappointed market participants. Inflation in the euro area is declining for the third consecutive month. What can we expect from the euro?

No matter how it seems, the inflation rate that was set in the autumn of last year is gradually extinguished with the euro zone's CPI is declining for the third consecutive month. This is a very unpleasant fact for the European Central Bank which set a 2% target in the next few years.

This is also an unpleasant moment for traders who are betting on the further strengthening of the euro at the beginning of this year. The main reason for the lack of demand is the probable postponement of the deadline for the curtailment of the ECB's repurchase program, which was scheduled for the fall of this year. Also, we have to forget about all the talk about raising interest rates in early 2019.

Let's understand why it happened that way.

According to today's data, even if it is preliminary, it can be seen that in February this year, the inflation rate in the eurozone slowed for the third month in a row. So, consumer prices in the euro area for the month of February rose by only 1.2% compared to the same period in 2017, which is below the target level of the ECB, set just below 2%. As early as November 2017, inflation showed an increase of 1.5%.



A number of experts associate a slowdown in inflation with a decline in energy prices, which revived the CPI in 2016 and kept it growing throughout 2017. Also, there is a noticeable lack of a fundamental link between the acceleration of economic growth and the rise in inflation that was to occur. A similar situation is observed in the United States.

If we talk about core inflation, which does not take into account volatile prices for energy and food products, then growth was at 1%.

As I have already mentioned, a number of European Central Bank leaders, including its president Mario Draghi, made it clear that as long as there is no concrete evidence of an increase in inflation, no one will talk about a change in soft monetary policy despite good economic growth.

It is important to note that the strong growth of the US dollar began yesterday after Federal Reserve Chairman Jerome Powell made a speech in the Congress where he said that there was an improvement in the prospects for the US economy, which keeps the Federal Reserve's policy rigid. So he outlined his position on further raising interest rates.

As for the technical picture of the EURUSD pair, the breakthrough in the support level of 1.2200 could significantly collapse the trading instrument, since there is a mass of monthly stop orders for buyers of risky assets below this range. The breakthrough at the level of 1.2200 will lead to a pair of support in the areas of 1.2130 and 1.2080, which will also allow us to hook the level of 1.2050.

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Elliott wave analysis of EUR/NZD for March 2, 2018



Wave summary:
There is not really anything new to say here. We continue to look for a continuation higher through the resistance at 1.6960 and 1.6999 for a continuation towards 1.7094 and 1.7470 as the next upside targets.

Short-term support is seen at 1.6867 and again at 1.6809.
R3: 1.7094
R2: 1.6999
R1: 1.6960
Pivot: 1.6900
S1: 1.6867
S2: 1.6809
S3: 1.6778

Trading recommendation: We are long EUR from 1.6790 with stop placed at break-even.

Analysis are provided byInstaForex.

Daily analysis of EUR/JPY for March 5, 2018

EUR/JPY This cross pair is a weak market. It is interesting to see the market is engaged in a long, protracted bearish movement. Since the beginning of February, at least, 700 pups have been shed. In the past few weeks, short-term rallies have been invariably followed by further southwards movements.



There is currently a Bearish Confirmation Pattern in the market. The price would continue moving downwards towards the demand zones at 130.00, 129.50 and 129.00. Nonetheless, a strong rally is in the offing, as the outlook on EUR pairs is bullish for this week.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

USD/JPY approaching resistance, prepare to sell



The price is seeing strong resistance at 106.47 (Fibonacci retracement, Fibonacci extension, horizontal overlap resistance, descending resistance) and a strong reaction could occur at this price to push it down to 104.77 support (Fibonacci extension). We do have to watch out for intermediate support at 105.24 (horizontal swing low support) which needs to be broken to open a further drop.

RSI (89) sees descending resistance hold price down really well with its bearish momentum.
Sell below 106.47. Stop loss at 107.34. Take profit at 104.77.

Analysis are provided byInstaForex.

Daily analysis of EUR/JPY for March 7, 2018

EUR/JPY
There is recently an upwards bounce in the market – in the context of a downtrend. The upwards bounce is yet to nullify the downtrend, but it would do so as soon as the price goes above the supply zone at 132.50, which would require a strong buying pressure. Right now, the EMA 11 is almost crossing the EMA 56 to the upside, and the RSI period 14 is above the level 50. Once the EMA 11 is above the EMA 56, the bias on the market would turn bullish.



There is still a Bearish Confirmation Pattern in the market, but the recent rally has become a threat to the extant bearish outlook. Nonetheless, a strong rally is in the offing, as the outlook on EUR pairs remains bullish for this week.

Analysis are provided byInstaForex.