The sentiment in the currency markets was volatile last week. At the beginning of the week, the U.S. dollar market was dominated by buyers, but as of Thursday, the balance shifted and sellers gained momentum, prompting a -0.5% depreciation of the U.S. dollar index in one trading session on Friday.
There were no big surprises among U.S. economic indicators. Industrial orders declined -3.7% per year. Transport and aviation, mainly due to Boeing's problems with the 737, were the biggest contributors. Interestingly, last week Boeing posted annual results which indicated first yearly loss since 1997, caused by problems with the 737 model. The consumer confidence index in the country rose moderately to 131.6 points, but has not yet returned to the cyclical heights. The number of new unemployed applications reached 216 thousand and was relatively stable compared to last week.
Last week, the U.S. Federal Reserve held a meeting, during which interest rates remained unchanged as members thought the sentiment in the economy remained fairly good. Members expect no interest cuts this year.
The main currency pair EUR/USD reflected changes in the U.S. dollar. Among the economic data in the Old Continent were the German Ifo index, which stood at 95.9 points, slightly adjusted, and German retail data, which showed a 0.8% year-on-year rise. In general, sentiment in Europe remains rather pessimistic. EUR/USD closed at 0.6% over the course of the week.
The most important Asian pair, USD/JPY, continued to fall to a level of 108.4 level and a 200-day moving average. Demand for the yen has remained strong, with anxiety about the Corona virus continuing as the number of infected people continues to rise. Among economic news, there was a preliminary change in industrial output, which stood at -3.0% per annum. Retail sales also declined by -2.6% year-over-year, suggesting that the country's negative sentiment among industrial companies is gradually being passed on to consumers who are becoming more cautious about consumption. USD/JPY has closed the trading week depreciating -0.8%.
The British pound rose against the U.S. dollar to 1.32 level. Among the political news was the decision of the European Parliament to approve England's withdrawal project, which means that Britain is no longer part of the European Union. Nevertheless, nothing has changed so far, as agreements on international trade and further cooperation must be reached this year. The Bank of England also held a monetary policy meeting but decided to keep interest rates at its current level, with 7 members voting in favor of stable levels and 2 members in favor of a reduction. There was no major economic news. GBP/USD finished trading up 0.5%.
This week will begin with industry sector managers index actual data. No major news is scheduled for Tuesday, and Wednesday will see results from the service PMI index. There will be not much information published on Thursday, with China and Germany's international trade results and U.S. labor market data expected on Friday.
According to Admiral Markets market sentiment data, 37% of investors have long positions in the EUR/USD pair (down -42 percentage points from last week). In the main Asian pair USD/JPY, 72% of investors have long positions (increased +20 percentage points). In the GBP/USD pair, 30% of participants expect a rise (down 17 percentage points). Such market data is interpreted as contraindicative, suggesting appreciation in EUR/USD and GBP/USD pairs and depreciation in USD/JPY pair. Analysis of positioning data should always be combined with fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
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