The new trading week began not just with a weekend in Europe and the UK, but also with a wave of speculation in the market. Let's start with the fact that during a press conference on April 5, British Prime Minister Boris Johnson was optimistic about the plans to get out of restrictive measures, pointing to a strong vaccination program and control of new cases of coronavirus infection.
The Prime Minister confirmed that starting next week all shops in England will open, not just for essential goods, restaurants, cafes and pubs with outdoor tables will be partially opened.
Note that the exemptions apply only to England, and not to Scotland, Wales, and Northern Ireland, which have their own requirements to contain the virus.
All this sounds very optimistic, it is for this reason that we could observe an increase in the value of the pound sterling on Monday (April 5), but there is a clear misunderstanding of speculators about what is happening in terms of the economy.
To begin with, the service sector has suffered so badly that it will take several years to recover. Relaxing quarantine measures is good, but at the same time, the UK government is advising British people to refrain from planning overseas vacations this summer, thereby damaging the hopes of airlines desperate to improve their balance sheets to save themselves from bankruptcy.
It is worth recalling that at the moment, British citizens are prohibited from traveling abroad, with the exception of a number of good reasons: treatment, study, work, funerals, and weddings of the next of kin. Violation of the rule leads to heavy fines.
The relaxation of this clause will be considered by the government in mid-May, but given the recommendation of abstinence, one should not expect any progress in the tourism industry.
In turn, the European Commission (EC) has published forecasts for the vaccination program, based on which Germany, France, Italy, Spain, and the Netherlands will be able to fully vaccinate more than 55% of their total population. The EU plans to immunize 70% of adults by the end of summer, which, depending on the demographics of each EU member state, equates to around 55-60% of the total population.
The EC's forecasts offer some hope that the EU's vaccination program will improve after a disastrous start dominated by delays, doubts, and political struggles over vaccine supplies.
The European Commission expects vaccine shipments to increase to about 360 million doses this quarter from just over 100 million in the first three months of the year.
The forecasts are positive, we will look at the result in a few months, but if we proceed from the current realities, where France is in a four-week lockdown, Germany has not left it, and the remaining EU members were mired in epidemics and economic problems, then one should not expect anything positive in the EU economy for 2021.
What is happening in the market in terms of technical analysis?
To begin with, speculation has become more frequent, which has nothing to do with the direction of the market.
The pound sterling (GBP/USD) has been subject to speculators for a long time, and if we proceed from the past day, nothing surprising has happened in the market. In this situation, it is worth noting that the quotes are still in the structure of the corrective move from the high of the medium-term trend (1.4224 ---> 1.3669). The splash of long positions did not change anything, perhaps it only teased the sellers, who will return to the market with renewed vigor, updating the local correction minimum - 1.3669.
In previous reviews, we have already pointed out that the pound sterling has a large margin for decline, while not even violating the integrity of the medium-term upward trend.
Therefore, you should not exclude short positions from consideration just because you saw the information that Boris Johnson believes in the quick relaxation of quarantine measures, this is primarily his job, and he must do his best to support the economy, even if it is about verbal support.
In turn, the euro (EUR/USD), which, in my opinion, was more restrained towards speculation, nevertheless sold out under their pressure, judging by the past day (April 5).
The rise in the value of the euro from scratch, given that the Europeans did not seem to work yesterday, suggests that there was no insider information regarding the forecasts of the European Commission, which were published today.
These are just guesses from scratch, such price impulses occur.
Back to the technical picture, an elongated correction from the peak of the medium-term trend (1.2349 ---> 1.1759) is still relevant among traders, despite recent speculation. Therefore, it should not be ruled out that we will still see a downward development, and traders will again start talking about a change in the medium-term trend.
Expectations and prospects
Today, all major players are back on the market, which means that trading volumes will level out.
In terms of the economic calendar, data on unemployment in the European Union were published, which brought an absolute shock. The unemployment rate rose from 8.1% to 8.3%, which indicates big problems in the EU labor market.
Investors are shocked, but speculators are preparing to jump.
Analyzing the current EUR/USD trading chart, you can see that after the recent inertial move, the quotes froze in a narrow range of 1.1795 / 1.1820, where the process of accumulation of trading forces is visible.
In simple words, speculators are preparing for a new surge in activity, and if we proceed from the data on the unemployment rate in the EU, there is a chance of downward development.
In this situation, if you are targeting short-term trading, I would advise you to work on the outgoing impulse relative to the deceleration limits at 1.1795/1.1820, the breakout method.
If you are focused on medium-term trading, then the downward development, given the difficult economic situation in the EU, looks like the most appropriate strategy.
What is happening on the EUR/USD chart in terms of indicator analysis and market dynamics?
Analyzing different time sectors, we see that technical instruments on the minute and hour intervals have a variable signal (buy/sell) due to price movement in a narrow range. The daily period, as before, is focused on selling, following the path of an elongated correction from the peak of the medium-term trend.
In terms of market dynamics, an acceleration is recorded by about 14%, if we consider the past day, a slowdown is seen relative to April 6, but the coefficient of speculative transactions continues to grow.
Analyzing the GBP/USD chart, one can see that speculators, as expected, played a buy/sell lot, which led to characteristic impulse changes in the market. In this situation, the entire upward cycle of April 5 has already been won back, and to return sellers to their original course, the quotes must remain below 1.3800 in a four-hour period. In this case, a path will open in the direction of 1.3750-1.3700.
It is worth considering that in connection with overheated positions, a local rollback may occur relative to the 1.1800 coordinate.
What is happening on the GBP/USD chart in terms of indicator analysis and market dynamics?
Analyzing different time sectors, we see that technical instruments follow the path of speculators on the minute interval, signaling a sell. The hourly period is gradually moving away from the speculation of the past day, the signal is buy/neutral.
The daily period, due to the renewal of the local maximum of March 29, changed the signal to buy/neutral.
In terms of market dynamics, it can be seen that market activity has increased in comparison with the end of last week, which indicates an acceleration of volatility, as well as speculative interest among traders.
