Daily Market Analysis from ForexMart

EUR/USD. May 24, 2021 | The pair is in the range of 1.2150-1.2250

At the beginning of the new trading week, the euro continues to trade in the range of 1.2150-1.2250. The current price of the EUR/USD pair is 1.2200.

The European currency was supported by the publication of the composite index of business activity (PMI) in industry and services of 19 eurozone countries in May. According to preliminary estimates, the indicator rose to 56.9 points in May from 53.8 points in April. At the same time, analysts had expected the indicator to rise to 55.1 points. Such figures became a record for three years and three months.

The index of business activity in the service sector of the euro zone in May, according to preliminary estimates, rose to 55.1 points against 50.5 points in April. Experts predicted growth to 52.3 points.

It is worth noting that many financial institutions are beginning to revise their forecasts for the euro area. For example, the Bundesbank believes that Germany will reach pre-pandemic levels in the fall of this year, and consumer prices may rise by 4%.

EUR/USD. May 25, 2021 | Euro is correcting after strong growth

The euro rate accelerated its growth on Tuesday, breaking through the upper boundary of the sideways trend 1.2150-1.2250. The European currency continues to be supported by the optimism of investors regarding the imminent recovery of global economies. And against this background, the demand for the «safe» dollar is declining, which is putting strong pressure on the American currency.

Additional support for the euro was provided by economic data from Germany. According to the final estimate of the country's Federal Bureau of Statistics, GDP in the first quarter of 2021 declined by 1.8% against a projected decline of 1.7%. On an annualized basis, the GDP of Europe's largest economy fell 3.4%, while experts had expected a decline of 3.3%.

The index of business expectations in Germany in May rose to 102.9 points (from 99.2), the forecast assumed the indicator at the level of 101.4 points. The business climate index was 99.2 points (forecast – 98.2 points).

However, the RSI indicator bounced off the resistance area, which signals a weakening of the euro and the return of the EUR/USD pair to the range of 1.2150-1.2250.

EUR/USD. May 26, 2021 | Euro declines from highs

The EUR/USD pair declines on Wednesday from the area of ​​local highs above 1.2250 to the level of 1.2220. However, market participants expect that the euro will continue to rise in the near future. It is possible that this may happen already before the next meeting of the ECB, which is scheduled for June 10.

The day before, traders drew attention to the data on German GDP and IFO business optimism. According to the published statistics, the German economy in the first quarter of this year contracted more than expected, falling by 1.8%. Ifo German business sentiment index rose to a 2-year high in May. The German business sentiment index rose to 99.2 in May from 96.6 in April. Economists had forecast the index would rise to 98. Additional support for the euro is provided by the general market optimism, which stimulates the growth of demand for risky assets.

As for the American dollar, everything here depends on the rhetoric of the US Federal Reserve System (FRS). On the eve of the regulator's representatives confirmed their adherence to a soft monetary policy and generally adhered to the «dovish» rhetoric. And this puts pressure on the greenback's course.

Today the macroeconomic calendar is completely empty. The pair will continue to trade below the upper border of the 1.2150-1.2250 range.

EUR/USD. May 27, 2021 | Dollar strengthened on positive macro data

The EUR/USD pair dropped below the level of 1.2200 and the bulls are unlikely to be able to return the euro to the area of ​​local highs in the near future. The current quote of the instrument is 1.2180.

Important macroeconomic statistics were not published yesterday, however, the dollar strengthened against the background of good yields on US government bonds, as well as due to general market neutrality. At the same time, the euro was pressured by data from the GfK company, according to which the leading consumer confidence index for June rose to -7 points from -8.6 points in May, worse than expected.

Today the focus of traders' attention is shifted to the USA, where the GDP data in the second estimate was published. The US economy expanded by 6.4% qoq, worse than expected. The initial level is also fixed at 6.4%. Data on the volume of orders for durable goods in April showed an increase of 1.0%, which turned out to be better than analysts' forecasts, who had expected an increase of 0.8% m/m.

Also today you should pay attention to the number of initial applications for unemployment benefits in the United States. The number of Americans who filed new applications for unemployment benefits last week fell more than expected – to 406 thousand. Analysts had expected 425 thousand applications. Taking into account these statistics, we can conclude that the US dollar will continue to strengthen and the pair quotes will return to the 1.2150 area.

EUR/USD. May 28, 2021 | The dollar strengthens below 1.22

The main currency pair continues to trade below the 1.2200 level. The current quote for the pair is 1.2180.

The dollar was supported yesterday by macroeconomic statistics on the US labor market. According to the Ministry of Labor, the number of claims for unemployment benefits for the week was 406 thousand, reflecting a sharp decrease compared to last week at the level of 444 thousand. Analysts predicted the figure at the level of 425 thousand.

The second estimate of US GDP for the first quarter did not reflect changes compared to the initial estimate, confirming the economic growth of 6.4% qoq. Experts had expected growth to 6.5% q/q. The volume of orders for durable goods in the US in April fell by 1.3% m/m after an increase in March by 0.8% m/m and the forecast of an increase this time by the same 0.8% m/m.

The dynamics of the dollar is now mainly influenced by the position of the FRS. If the regulator continues to continue its stimulating policy, ignoring inflationary risks, the greenback has little chance of strengthening. US Treasury Chief Janet Yellen believes that annual inflation in the country will be high at least until the end of this year, and Yellen estimates the recent inflationary surge as a temporary phenomenon.

European indices Stoxx Europe 600 and DAX on Friday updated records

The composite index of the largest enterprises in the region Stoxx Europe 600 increased by 0.57%, to a record 448.98 points. The German DAX climbed 0.74% and surpassed the 15,500 mark for the first time.

The French CAC 40 gained 0.75% and hit its highest level in 21 years.

The British FTSE 100 indicator rose 0.04%. Italy's FTSE MIB and Spain's IBEX 35 added 0.45% and 0.42%, respectively.

Global markets are being supported by signs that the US economic recovery from the COVID-19 pandemic is gaining momentum.

The data on the US labor market, released yesterday, showed a more significant than expected reduction in the number of applications for unemployment benefits in the country. The number of new applications last week decreased by 39 thousand, to 406 thousand, the lowest since the beginning of the coronavirus pandemic. Analysts on average expected the number of applications to decrease to 425 thousand.

The consensus forecast of experts provides for the growth of the PCE Core index in April by 2.9%, the highest since 1993.

Market participants are also watching talks in Washington on an infrastructure spending plan to further support the economy.

In the fourth quarter of last year, according to revised data, French GDP fell by 1.5%, not 1.4% as previously reported.

Shares in UK developer Vistry Group PLC jumped 4.3% in Friday trading, ranking among the top gainers among the Stoxx Europe 600 components.

Siemens AG, Europe's largest industrial conglomerate, rose 3.8%.

The leaders of the fall were the shares of the Spanish bank Banco de Sabadell SA, which lost 4.5%.

Antofagasta Plc, one of the world's largest copper producers, lost 2.2%.

The dollar is waiting for specifics from the Fed

Fundamentally, the dollar looks weak. Arguments in favor of its further decline have been listed for several weeks. If last week a deeper sinking of the dollar did not take place, in particular, due to large placements of the US Treasury, then it is quite possible to fall to new lows this week. The next few sessions are exempted from bond placements.

It is worth noting that the marks of 89.00–90.0 points serve as a kind of support for the American currency index, which is quite efficient. Despite the increased pressure, the dollar does not fall below. Yes, the American dollar is weak, but in order to gain more arguments in favor of further weakening, you need to look around and carefully study what is happening. Not everything is so simple here, some statements of the FRS members caused some distortions in the markets. And yet, the US Central Bank in the near future may begin substantively talking about the beginning of the reduction of quantitative easing.

Real estate in the USA is becoming more expensive at alarming rates, which provokes comparison of the current situation with the period of 2006-2007. After the coronavirus crisis, it was not enough to get into a mortgage. At least some kind of reaction is now expected from the Fed.

Expectations of hints of at least some action support the dollar a little, at least they are able to keep it from falling deeper. At the same time, the technical picture in the dollar index on the weekly time frame indicates the possibility of a double bottom formation around 89.00 points.

Euro and the US dollar continue to fight for control in the currency market

The race for leadership continues between the American and European currencies. The competition between these two currencies keeps the market in good form, heating up an already tense situation.

On the morning of June 2, the EUR/USD pair was sharply trading around the level of 1.2214, gradually rising from the previous close at 1.2211. But compared to June 1, the main currency pair loses noticeably, declining from the level of 1.2230. It can be noted that an important resistance level for the euro has formed near this level.

In order to strengthen the "bearish" sentiment and to break through the support level of 1.2212 and the mirror level of 1.2200, the EUR/USD pair will head to the levels of 1.2163, 1.2128, and 1.2102. In the other scenario, the instrument will remain within the price range of 1.2212-1.2232. It can be noted that the ANZ Research Bank's experts expect the pair to slowly increase to the level of 1,2300 in the second quarter of 2021, and to 1.2400 and to 1.2600, respectively in the third and fourth quarters.

However, the continuation of the growth may become more complicated amid the high probability of curtailing the Fed's stimulating policy. There are ongoing discussions about this in the market, but the implementation of these plans is still uncertain. The current situation keeps the US dollar in suspense, and its dynamics are far from stable. This week, the US dollar is trading near five-month lows, yielding not only to the Euro, but also to commodity currencies.

AUD/USD: Does the Australian dollar need help to see further paths?

The Australian dollar remains relatively calm, being in the existing price range. However, experts warn traders against being too relaxed, believing that the currency can change direction at any time.

During the current week, the Australian dollar experienced a slight volatility. On Wednesday, June 2, the Australian dollar sank slightly, despite the positive macro statistics received from Australia. According to a report from the Australian Bureau of Statistics (ABS), in the first quarter of 2021, the country's GDP increased by 1.8%, and on an annualized basis – by 1.1%.

The current situation has had a positive impact on the dynamics of the Australian dollar. On the morning of Thursday, June 3, the AUD/USD pair was trading near 0.7724, trying to get higher. According to analysts, since the beginning of this year, the tandem has remained in a wide range – from 0.7600 to 0.7835. Over the past three weeks, it has narrowed to 0.7680 and 0.7815. According to experts, the AUD/USD pair lacks strong drivers for a further breakthrough. In the event of their appearance, the scale of the tandem can tilt either downward or go up.

BTC reaches $38,100 after five days slump

On June 2, the crypto community froze in anticipation of the formation of the "death cross" figure on the horizontal charts of bitcoin. Despite the high probability of such a scenario, the market supported bitcoin. The indicators of the BTC/USD pair rose by 5% and reached $38,100 for the first time since May 28. Bitcoin has shown signs of life and encouraged the entire market, but it is still too early to talk about the beginning of an upward trend.

Despite the encouraging results and the almost complete exclusion of the possibility of retesting $30,000, bitcoin is in an unstable position. To consolidate the sudden success caused by the activity of the market, the indicators of the cryptocurrency need to overcome and gain a foothold above the $40,000 mark. Given the current dynamics of price changes (+0.5%) and the daily trading volume that has dropped to $33 billion, there is reason to believe that BTC is still at the consolidation stage. The asset continues to accumulate the volumes necessary for a successful assault of the $40,000 mark and is a little nervous around $39,000. At the same time, the sudden increase to $38,000 indicates an upward trend in market support. This may be a signal for the entry of more skeptical players, who will accelerate the accumulation of the necessary volumes to gain a foothold above the psychological mark.

As of 10:00 UTC, bitcoin quotes are in a safe corridor, and the asset is gaining momentum, as can be seen on the horizontal charts. It is likely that with the proper level of market support, the cryptocurrency will be able to reach $40,000 by the evening of June 3. The latest decline in bitcoin indicators occurred in the region of $38,900, but the coin almost immediately won back the fall and continued to grow. BTC quotes had problems reaching the $39,000 mark, where the coin collapsed on June 29. This threshold will be the last significant problem before the retest of the $40,000 mark. Given the growing interest in the first cryptocurrency, we can expect a successful breakout of the round mark in the upcoming test.

Ethereum and the Ripple token are able to provide a reverse service to bitcoin, increasing interest in the cryptocurrency market by accumulating their own reserves. This interaction between assets was made possible due to the significantly increased correlation between altcoins and bitcoin, which reached 60%-80%. At the same time, the positive news was not fully won back by the market, which may become an additional factor in the success of BTC. For example, it became known that Google will lift the ban on advertising cryptocurrency platforms and wallets in the United States. In addition, Messari analysts added a positive message to the market, who believe that the collapse of the crypto market and bitcoin is caused by excessive oversaturation and inadequate reactions of players to economic events, and not by the fundamental problems of the first cryptocurrency. The Chainalysis platform also confirmed that whales continue to actively increase their positions in bitcoin and have purchased from 70,000 to 120,000 bitcoins over the past days of the collapse. The growing confidence of investors, supported by positive announcements, can be a determining factor in the successful retest of bitcoin of the $40,000 mark.