Average volatility over the past 5 days: 153p (high).
The EUR/USD pair continued the downward movement on the third trading day of the week. After a short respite, the downward movement resumed, the Kijun-sen line was overcome, and the euro/dollar pair has currently worked out the Senkou Span B line, which can also not be delayed for a long time. Thus, the chances that the downward movement will continue to increase significantly during today’s trading. However, there is also reason to believe that we are now witnessing a correction against a correction. Judge for yourselves: we observed a strong drop in the currency pair in the period from March 9 to March 23, and then a strong growth from March 23 to March 27, which totaled approximately 60% of the previous fall. Now we can observe a correctional decline already against the growth of March 23–27. Given the fact that the volatility of the pair is slowly decreasing (so far 122 points have been completed so far), there really is reason to expect a smooth calm of the currency market. If this hypothesis is true, then this is great news for traders who are tired of quite crazy trading in the last month.
There were plenty of macroeconomic data today. The day began with the publication of a report on retail sales in Germany, which in February increased by 6.4% in annual terms and 1.2% in monthly terms. It seems that these figures reflect the panic of the population in grocery stores and pharmacies when the coronavirus was just getting closer to Europe. Then there were published indexes of business activity in the manufacturing sector in Germany (45.4), France (43.2), Italy (40.3), Spain (45.7), as well as in the European Union as a whole (44.5). As you can see, absolutely all indexes remain below the key level of 50.0, below which the industry has recorded a decline. However, it cannot be said that they fell below this level in March. Almost all indices related to the manufacturing sectors of the eurozone have long been in the recession zone. During the epidemic of the coronavirus, they only deteriorated even more in their values. But the unemployment rate in the European Union at the end of February even slightly fell, from 7.4% to 7.3%. However, the most interesting traders expected in the US trading session.
A report on changes in the number of employees in the private sector in the United States was released by the ADP. Forecasts predicted a reduction of 150-170,000, but in reality the reduction was only 27,000, which is undoubtedly much better than the expectations of traders. It is difficult to say why such a small reduction in the number of workers is due, given the 3.3 million applications for unemployment benefits last week. However, we believe that this report provided support for the US currency. At least in pairs with the European currency. The other reports of the day, both European and US, were much less likely to provoke a reaction from market participants. The Markit US manufacturing PMI was also released today, which fell by just 0.7 points from the previous month to 48.5. In current conditions, this value can be considered positive. The ISM manufacturing PMI, which is considered more important than Markit, was also published. It also fell by a minuscule value – just a point to 49.1 (in February, 50.1). Thus, business activity in US manufacturing was almost unchanged compared to February. Perhaps these reports also supported the demand for the dollar a little. But the index of new orders in the manufacturing sector ISM in March fell quite seriously and reached only 42.2. This figure means that the number of orders has decreased, and industrial production may slow down in April, if not in March. It is possible that business activity was still at a relatively good level in March, but it will still fall in April.
What can I say about the whole package of statistics? It could have been much worse. March turned out to be an unexpectedly good month, given the raging epidemic in the US, but these same indicators may collapse in April. However, we will not get that far ahead of ourselves. After all, April is just beginning.
As for the coronavirus epidemic, there is no good news. Worldwide, 883,000 diseases and 44,000 deaths were recorded. The number of infected people in the United States is approaching 200,000. According to medical experts, in Italy and Spain, there are the first signs that the epidemic is on the wane. This is not reflected in such high rates of disease growth as before. However, doctors also note that this moment may be an accident. Also, the COVID-2019 virus may have a so-called second wave. In any case, it is too early to celebrate the retreat of the epidemic. Although, of course, we would like to hope that the epidemic is really receding and the quarantine measures are yielding results in all countries of the world.
Average volatility over the past 5 days: 294p (high).
The GBP/USD currency pair is practically in one place on April 1 (the third day in a row). The volatility of the British pound remains high, much higher than the euro (if you take the average). Nevertheless, the pair is trading in the same price range, although quite wide. All macroeconomic statistics from overseas did not have any impact on the course of trading the pound/dollar pair. The Markit manufacturing business activity index was also published, which amounted to 47.8 in March, which is higher than forecasted values, only 0.2 points below the previous value. However, as in all other countries that we studied today, the index is below the level of 50.0, that is, in the recession zone. Thus, the British pound continues to maintain high chances for an upward trend, but it seems that at this time market participants do not know what to do next. The panic is gradually disappearing from the markets, but since oil prices remain extremely low, and the epidemic continues to spread throughout the UK, the European Union, and the United States, a new outbreak may occur at the foreign exchange market at any time. Thus, you need to be prepared for any scenario. In the UK, meanwhile, the number of cases rose to 30,000 and the number of deaths from coronavirus is approaching 2,400.
Recommendations for EUR/USD:
For short positions:
The EUR/USD pair continues to move down on the 4-hour timeframe. Thus, it is now recommended to trade down with the targets of 1.0861 and 1.0799 levels before turning up MACD or rebounding from any target.
For long positions:
You will not be able to buy the EUR/USD pair until the price reverses above the Kijun-sen line, which will indicate the resumption of the upward trend. The first goal is the volatility level of 1.1167.
Recommendations for GBP/USD:
For long positions:
The pound/dollar pair is currently trying to resume the upward movement. Thus, it is recommended to buy the British currency with the goal of a volatility level of 1.2716 after the MACD indicator turns up or, conversely, stay in longs until a more eloquent signal of the start of correction.
For short positions:
It will be possible to sell the GBP/USD pair no earlier than breaking the critical line with the first goal of the support level of 1.1771 and small lots, since the price will be higher or inside the Ichimoku cloud at this time.