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11.02.202009:58 Forex Analysis & Reviews: Trading plan for EUR/USD and GBP/USD on 02/11/2020

It seems like the macroeconomic calendar was completely empty yesterday, and the information background is relatively quiet, but the single European currency continued its steady decline. At the same time, the pound behaved decently and did nothing for no reason. And in this regard, the particular behavior of the single European currency is of particular interest.

Exchange Rates 11.02.2020 analysis

However, macroeconomic data were not published yesterday. The fact is that Italy, which is the third euro-zone economy, reported on its industrial production. The decline of which increased from -0.8% to -4.3%. This is not only an extremely strong decline, but it has also been going on for ten consecutive months. Thus, the picture becomes very dull, in combination with the decline in industrial production in France and Germany.

Industrial production (Italy):

Exchange Rates 11.02.2020 analysis

And of course, I just want to say that this is what caused the further weakening of the single European currency. But the fact is that the data was published three hours before the single European currency resumed its decline. However, the contribution of extremely weak industry data cannot be denied, but quite in general across Europe, rather than separately throughout Italy. Thus, the weakening of the single European currency is more likely associated more with inertia and general negative sentiment in relation to the prospects of the European economy.

Today, there will be sufficient macroeconomic data. However, they all relate to the UK and its pound. Given that there are quite a few of them, it is worth analyzing all of them, so to speak, by increasing their importance and influence. And perhaps, the most insignificant indicator is the trade balance, which was already in surplus in November, as much as 4.0 billion pounds. This is rare for the UK, as it is usually scarce. At the same time, December data should show a return to normal, as the trade deficit could reach 2.6 billion pounds. And given the fact that this is a normal condition for the UK, this indicator will not be able to have a significant impact.

Trade balance (UK):

Exchange Rates 11.02.2020 analysis

This can not be said about the construction sector, which is extremely important for the UK, as it is directly related to the real estate market, which is one of the main criteria for determining the investment attractiveness of the United Kingdom. However, the prospects for this sector of the economy are quite sad, since orders in the construction industry have been declining for the second month in a row. At the moment, they are reduced by as much as 6.8%. Another thing is that such a large-scale reduction cannot last forever, and a slowdown in the pace of decline is expected to reach 3.6%, which can speak of at least a hint of some optimism.

Orders in the construction sector (UK):

Exchange Rates 11.02.2020 analysis

The situation is similar with the industry in general, since here, a slowdown in the recession is expected. Another thing is that the recession has been going on for eight consecutive months, and currently stands at 1.6%. So, there is hope that the decline will slow down to 1.0%. Nevertheless, it can hardly be called such good news, since the recession itself will continue. Thus, as in the case of orders in the construction industry, the only positive thing is the slowdown in recession, which does not change the overall picture.

Industrial Production (UK):

Exchange Rates 11.02.2020 analysis

But all this decrease in importance against the background of preliminary data on GDP for the fourth quarter. Moreover, they should show a further slowdown in economic growth. The fact is that the UK economy is already slowing down for two consecutive quarters, and if forecasts are confirmed, then the slowdown will last three quarters. At the same time, the growth rate should decline from 1.1% to 0.9%, that is, below 1.0%, which in general can already be called uninteresting stagnation. So overall, British macroeconomic data will be more likely negative.

GDP growth rate (UK):

Exchange Rates 11.02.2020 analysis

Nevertheless, the forecasts for the United States are more likely positive, since the number of open JOLTS vacancies should increase from 6.8 million to 7.0 million. Moreover, the latest labor market data showed a much larger increase in the level of economic activity, that is, an increase in the proportion of physically abled people in the total population. And this indicator can grow only at the expense of young people who, for the first time in their lives, have begun to search for their first job. Moreover, if the number of open vacancies is growing, then all these young and hopeful people will not replenish those of the unemployed.

Number of Job Openings JOLTS (United States):

Exchange Rates 11.02.2020 analysis

The euro / dollar currency pair, showing increased downward interest, managed to reach the area of autumn last year, where market activity declined many times. It is likely to suggest that a slowdown may occur within 1.0880 / 1.0915 if the pattern of the past is repeated, and stagnation may turn into a rebound.

Exchange Rates 11.02.2020 analysis

The pound / dollar currency pair found a foothold in the region of 1.2885 after a rapid inertial course, subsequently forming stagnation. It is likely to assume fluctuations within 1.2872 / 1.2960, where the development will be built on the principle of breakdown of borders.

Exchange Rates 11.02.2020 analysis

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Mark Bom,
Analytical expert of InstaSpot
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