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Market Analysis – EURUSD

The movement and events surrounding the US Dollar over the past few days have come at quite a shock to investors around the financial markets. This is one possible reason why traders should ensure they are not only analysing the price movement, but also economic events, statistics, and fundamentals in general. The movement of Friday saw the largest amount of price volatility this year so far with the exchange rate moving by almost 100 pips at an increase of 0.82% in one sole trading session.

The price movement on Friday did not simply react to the employment figures released, but also saw considerable growth the day before and during the early Asian and European sessions. Without-a-doubt, the momentum had increased after the announcement which shocked markets. The figures released were unexpected as we witnessed the employment rate increase for the first time in thirteen months.  The price movement this morning so far is showing little volatility, a slight retracement was formed during the first few hours of the market open, but momentum has quickly been lost. The price is currently slightly lower than market close on Friday. Even with the slight pullback the price releases at price highs since the 26th February. 

Looking at the figures, the Nonfarm Payroll fell sharply from 708,000 to 218,000 instead of the expected growth to 978,000. The unemployment rate rose from 6.0% to 6.1% instead of the expected decline to 5.8%. The largest increase in employment rose in the leisure and hospitality sectors, but these sectors still have 2.9M fewer jobs than before the crisis, which is a significant amount and hence why the Central Bank lately has stood to their dovish tone. The current situation confirms the opinion of US Federal Reserve officials, who previously argued that the American economy is recovering, but the target is still very far away.

European investors are focused on the publication of data on industrial production and foreign trade in Germany. For March, industrial production grew by 2.5% and exceeded the market’s expected value of 2.3%. The volume of exports of German goods for the same period increased by 1.2%, but imports of foreign products to Germany increased by 6.5%, as a result of which the trade surplus fell from 18.9B to 14.3B Euros. German industry remains the locomotive of the economy amid the pandemic as the demand for German goods from foreign partners is growing. On Friday, German Health Minister, Jens Spahn, said that the third wave of the pandemic was at a turning point as most countries around the EU came out of a third lockdown with hopes of it being the last. 

Generally speaking, the Eurozone has been supported by a rise in inflation which has now reached 1.6% after 4 month of recovery. The rise in inflation can support exchange rates generally speaking as they are known to trigger a more attractive monetary policy. Though comments by the Central European Bank remain dovish as the President has confirmed it is not yet known whether the inflation levels will remain high in the longer term and that the region can “cope” with the higher level; a similar stance to the Federal Reserve. 

When looking at the currencies individually we can see a similar story. The US Dollar had declined for three consecutive days when looking at the USDX, but it should be noted the price has slightly climbed this morning and is hovering close to support levels seen in the months of January and February this year. The Euro on Friday strengthened  against its main competitors including the Yen, Pound, and CAD. The Euro Currency index is currently declining. 

This week we have no major events for either currency until Wednesday when the US is due to release its CPI figures and Friday when they will confirm sales figures for the month of April. No major economic news is due this week for the Eurozone, but they are planned to have a busier schedule the following week. 

Support Levels: 1.2052, 1.1985

Resistance Levels: 1.2176, 1.2241





Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.

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