EUR/USD
On July 1, the EUR/USD pair advanced by only 15 basis points. Thus, the current wave marking did not indicate any significant changes. However, I still expect the upward wave 5 to enter C or B area. If this scenario is true, the quotes will resume their growth up to the targets at 161.8% and 200.0% Fibonacci. Until the pair has not tested the low of the wave 4, the current version of the wave marking does not require any corrections or additions.
Fundamental factors:
Wednesday was full of economic events in the US and the European Union. However, market activity remained quite low, especially on the euro/dollar pair. The economic data from the EU can be easily viewed as positive. Retail sales in Germany rose 3.8% year-on-year in May, although markets were expecting a 3.5% drop. The unemployment rate in Germany was 6.4% in June, while analysts expected it to be 6.6%.
Besides, the number of jobless claims came at 69 thousand instead of the 120 thousand predicted earlier. In addition, business activity in Germany, France, Spain and other parts of the eurozone has significantly improved. Economic data from the US was not so upbeat, however. While business activity indices also exceeded market expectations, the ADP National Employment Report turned out to be much worse. Market participants are still worried about the situation around coronavirus in the United States where the daily increase in new cases hit record highs every day. At the moment, there are not so many reasons for USD to rise.
What is more, today the White House has completed the list of sanctions against Chinese officials involved in creating a national security law in Hong Kong. The controversial law has caused serious disapproval from the US as well as from the European Union and other countries. However, I think that Washington has chosen the least aggressive way to respond to Beijing’s actions, clearly fearing possible counter measures.
Any further escalation of conflict and worsening of trade relations could be detrimental to weakening American economy. The economic data released today in the US turned out to be much better than expected. In particular, NonFarm Payrolls amounted to 4.8 million instead of the 3 million expected earlier.
Conclusion and recommendations:
The euro/dollar pair continues to build the upward wave C in B area. Thus, I recommend opening long positions on the pair with the targets located near 1.1406 and 1.1570. These targets correlate with 161.8% and 200.0% Fibonacci for each upward signal on MACD indicator calculated on the formation of wave 5 in C or B.
GBP/USD
On July 1, the GBP/USD pair gained 75 basis points, and the entire wave marking became even more complicated. Thus, the wave pattern may require some adjustments in the near future. Therefore, I recommend that you wait until the situation clears up and only after that resume trading on the pound/dollar pair.
Fundamental factors
On Wednesday, there was only one economic report issued in the UK which showed that index of business activity in the manufacturing sector settled at around 50.1. Today, there was no more statistical data from the UK. Despite this fact and the weak US data, the demand for the British currency has been high in recent days. This was reflected in the current wave marking. Yet, the US dollar has not advanced today even amid fairly good news from the US.
Conclusion and recommendations
The changes in the pound/dollar pair trajectory have formed some complex structures on the current wave marking. According to them, a downward trend could be formed soon. But at the same time, the wave pattern may require new adjustments. So, for now I do not recommend working with this instrument.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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