On Monday, March 2, trading on the euro was 90 points up at the close. The single currency received support from the sharp increase in the EURGBP pair, as well as the general weakening of the US dollar after the release of weak data. The euro strengthened against the GBP amid the upcoming Brexit negotiations. Investors are preparing for difficult negotiations. Negotiations will last until Thursday.
The USD came under pressure due to weak data concerning the business activity index in the US manufacturing sector. The negative impact of coronavirus on the global economy and weak economic data may force the US Federal Reserve to lower interest rates. The market expects that in March the regulator will lower the rate by 50 bp to 1.00-1.25% to support the economy.
Today’s events (GMT 3):
- 12:30 UK: Markit Construction PMI (Feb).
- 13:00 Eurozone : Consumer Price Index (YoY) (Feb), Unemployment Rate (Jan).
- 22:50 USA: Fed’s Mester speech.
The news backdrop was favourable to the EURUSD pair. With the support from the main EURGBP cross, EURUSD rose to 1.1185. Bulls cancelled all divergences, dropping the price into a zone above the U3 line – sma55 ( 1%). The price was not in this zone for long. At the time of writing, the euro is worth 1.1128. The correction equalled 45 degrees.
The speed of moving average lines has increased. In this regard, I am waiting for correction to the balance line (sma55), to 1.1070-1.1080. Since there is no “bearish” divergence between the price and the AO indicator, you need to be prepared for a new high to be set. In order to provoke bulls to ditch long positions, it is necessary to push the rate down below D1 (1.1030).