EUR/USD and GBP/USD. Results of May 1. Trump: the "crown" virus is out of control in the laboratory of China. The United

4-hour timeframe


Average volatility over the past 5 days: 88p (high).

The EUR/USD currency pair continued its upward movement throughout the last trading day of the week after a similar even stronger movement on Thursday. As it turned out on Friday, the euro/dollar currency pair did not need correction. By the end of the day and week, the pair's quotes reached the second resistance level of 1.0985, and the trading ended there. We still need to understand what moved the European currency quotes up on May 1 and draw the appropriate conclusions.

It should be said at once that last Thursday, many traders could conclude that the markets began to react again to macroeconomic statistics and the fundamental background. From our point of view, this is not the case. Given the huge number of macroeconomic reports from overseas and the EU, the pair stood in one place for most of the day. And then, when it rushed up, there were just no special grounds for this. We do not believe that the expansion of the Fed's lending program by $ 500 billion (another 500 billion to support the economy) could trigger a strong fall in the dollar. Otherwise, we might expect something similar from every ECB or Fed statement about injecting another hundred of billions and trillions into the economy. However, until the day before yesterday, there was no reaction to these actions by the central banks and governments of the US and the EU. We also do not believe that on Thursday, market participants reacted with mass sales of the US currency to reports on changes in personal income and spending of Americans. Yes, the figures were very disappointing, but again, did anyone expect that the income and expenses of people, 20 million of whom lost their jobs, would grow? Or that they will be reduced moderately? After all, Americans not only lose their jobs, they also stay at home, and most businesses and firms are closed for quarantine, that is, there is no money, and even if they were, there is nowhere to spend them especially. Therefore, from our point of view, hardly anyone was very impressed by the fall in these indicators. As for the report on applications for unemployment benefits, which amounted to another almost 4 million, there is also nothing surprising or unexpected. Moreover, there is a tendency to reduce the number of new applications, as all those who could be dismissed, the American business has already dismissed. Previously, the US dollar has never responded to more impressive numbers with a fall. Thus, we believe that even if some traders reacted to the published statistics on Thursday, the reaction was mixed.

Thus, we can draw a similar conclusion on Friday. The growth of the European currency began in the morning when no new publications were published by that time. Moreover, in the European Union, no reports were scheduled for Friday. However, the euro currency continued to grow (at the same time, the pound has already started to adjust). In the second half of the day, when the indices of business activity in the US manufacturing sector were released, the strengthening of the euro currency stopped, although data from overseas were contradictory. On the one hand, the Markit business activity index was even worse than the preliminary value for April (36.9) and amounted to 36.1. On the other hand, the ISM index, which is considered more significant, fell not to 36.7, as predicted, but to 41.5. But what difference does it make if both of these values indicate a serious decline in production?

The last thing we would like to draw traders' attention to is the correction of the British currency. In the UK, the index of business activity in the manufacturing sector was also published on May 1, the value of which did not surprise anyone. However, the pound began to fall in price during the night and continued to do so throughout the trading day. Thus, there was no correlation between the EUR/USD and GBP/USD pairs on Friday. And if there was a strong fundamental background in the Foggy Albion or the European Union that could cause the pair to split, then there would be no questions. But there was no such background. Thus, we come to the same conclusion that traders still do not pay attention to news and macroeconomic data, and it is best for market participants to trade now using "technology".

And, of course, there's always Donald Trump, where a single day is not complete without his speech. Yesterday, the American President said that according to his information, the "coronavirus" was developed in the Wuhan laboratory, from where it broke free. Also, Trump said that the United States is now conducting investigations about the actions or inaction of China in the framework of countering the virus. "We are now finding out how this happened. We must get an answer, and it will determine how I will treat China in the future," the US leader said. Trump believes that China either failed to contain the virus or did not want to do so. The US President also said that he could impose new duties on imports from China, thus unleashing a new trade war with Beijing (since it is unlikely that China will not respond with mirror duties), if it is confirmed that it is involved in the deliberate spread or non-maintenance of the virus. Also, the American President issued a new forecast of mortality from the "Chinese pandemic" in the United States. According to the new opinion of trump, about 100,000 Americans will die.

4-hour timeframe


Average volatility over the past 5 days: 120p (high).

The GBP/USD currency pair has been adjusted since May 1. On Thursday, as well as for the euro/dollar pair, the quotes soared up. There was little reason for this since there was no important news from Britain that day at all. The main event of the day was the meeting and its results of the European Central Bank, as well as a package of important macroeconomic statistics from the European Union. However, the pound also rose in price, and on Friday began to logically play this movement in the opposite direction. The pair's quotes are fixed below the critical line, so now we are even talking about a possible change in the trend to a downward one. However, according to the fundamental picture of things, there is still no advantage for either the dollar or the pound. We also once again draw the attention of traders to the fact that the pair's quotes on Thursday perfectly worked out the previous maximum and bounced off it. Thus, the probability of forming a new downward trend is growing.

Recommendations for EUR/USD:

For short positions:

On the 4-hour timeframe, the EUR/USD pair continues to strengthen its upward movement. Thus, the sale of the euro currency can be considered no earlier than the reverse fixing of the price below the Kijun-sen line with the first goal of the volatility level of 1.0862.

For long positions:

Long positions are currently relevant with targets of 1.1038 and 1.1073. A rebound from any target will signal the beginning of a downward correction.

Recommendations for GBP/USD:

For short positions:

The pound/dollar pair started to adjust. Thus, traders on Monday are recommended to consider selling the British currency with the aim of selling Senkou span B, but in small lots, since there is no "dead cross" yet, and the "linear regression channels" system does not yet signal a change in the trend.

For long positions:

Purchases of the GBP/USD pair will again become relevant with the goal of 1.2624 if traders manage to gain a foothold back above the critical line.

The material has been provided by InstaForex Company -