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U.S. dollar remained in consolidation range

April 20, 2020 11:30

Stock Market

Last week, the news and economic data did not promise much in the way of positivity, but the market reacted to it quite passively and remained in a consolidation range. The International Monetary Fund has updated its forecast for the global economy, which expects a -3% fall in 2020, which will be the worst result since the 1929 depression. It also well reflects the change in sentiment in the market, when the forecast released in January 2020 expected appreciation of 3.3% and in just 3 months swept -6.3% of global growth, mainly due to the virus.

The situation of the coronavirus has changed relatively little, with a slight increase in new illnesses and deaths in Europe over the last week, so the overall situation has changed very little. U.S. news, meanwhile, remained poor, with the number of new patients continuing to fluctuate around 30 thousand a day, and the number of deaths rising as high as 2.6 thousand a day on Wednesday and Friday, the highest during the epidemic. The total number of infected people in the country is about 750 thousand and has increased by about +50% from 500 thousand in a week.

USD

Among economic data, the number of new jobless applications received the most attention from investors, reaching 5.2 million per week and falling from 6.6 million, but remaining in historic highs. There were 22 million jobless applications per month, which is about 14% of those working in the country. The country's retail sales performance in March was also observed, which disappointed market expectations when a -6.2% drop was recorded compared to the same period a year ago. Industrial production fell -5.5% year-on-year.

Euro

The main currency pair EUR/USD fluctuated relatively insignificantly and depreciated to 1,085-point level. Economic data included February industrial output, which fell -1.9% year-on-year, although it does not show the full impact of the virus and quarantine. Annual inflation in Europe was 0.7% in March. Europe remains constrained by the virus epidemic, with major countries likely to resume operations in early May. EUR/USD pair has ended the week depreciating -0.6%.

JPY

The main Asian pair, USD/JPY, depreciated slightly and settled below the 200-day moving average. Among the economic data was the change in industrial volumes in February, which has dropped -5.7% year on year, reflecting extremely weak sentiment around the world and declining demand for goods. USD/JPY has ended the week depreciating -0.8%.

GBP

The British pound fluctuated at 1.25 level and remained below the 200-day moving average when the breakthrough failed. The country continues to suffer from the coronavirus, with the number of new infections remaining stable at 5,000 a day and the number of deaths falling at the beginning of the week, but later reaching around 900 per day. No significant economic news were published in the country. GBP/USD has ended the week appreciating +0.4%.

Economic Events

This week will start with Japan's March export data. On Tuesday, investors will be watching British labor market data and German ZEW index data. Inflation data for Britain will be expected on Wednesday, and retail sales figures and preliminary Purchasing Manager Indices for the industrial sector in key economies will be expected on Thursday. U.S. industrial order data will be released on Friday.

According to Admiral Markets market sentiment data, 42% of investors have long positions in the EUR/USD pair (down -16 percentage points from last week's data). In the main Asian pair USD/JPY, 40% of investors have long positions (increased +7 percentage points). In the GBP/USD pair, 40% of participants expect a rise (down 7 percentage points). Such market data is interpreted as a contraindicator, therefore all three pairs - EUR/USD, USD/JPY and GBP/USD are expected to rise. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.

Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com

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