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EURUSD: downwards correction incomplete


Trading on the euro closed down on Monday. The US dollar rose slightly against the dollar in the wake of a partial closing of long positions.

The euro/dollar rate has fallen to the 45th degree at 1.1626 and stabilised beneath the LB balance line. Price fluctuations are fairly restrained given that trader attention is fixed on the outcome of the FOMC’s meeting on Wednesday.

US statistics:

  • Existing home sales in the US in June came to 5.52 million (forecast: 5.57m, previous reading: 5.62m).
  • The Markit services PMI for July came to 54.2 (forecast: 54.2, previous reading: 54.2).
  • The Markit manufacturing PMI for July came to 53.2 (forecast: 52.3, previous reading: 52.0).

Day’s news (GMT+3):

  • 09:00 Germany: import price index (Jun);
  • 11:00 Germany: IFO business climate (Jul);
  • 13:00 UK: CBI industrial trends survey (Jul);
  • 16:00 USA: housing price index (May), S&P/Case-Shiller home price indices (May);
  • 17:00 USA: Richmond Fed manufacturing index (Jul);
  • 20:00 UK: MPC member Haldane’s speech.

EURUSD rate on the hourly. Source: TradingView

From its high of 1.1684, the euro rate has corrected by 45 degrees. It turned out to be strong, as sellers failed 4 times to break through it. In Asia, the euro’s restored to 1.1663. The euro’s rise was facilitated by ECB Executive Board member Yves Mersch’s speech in Singapore, in which he touched on the Eurozone’s economic recovery.

From 1.1626 upwards, a beautiful three-wave correction has formed. On the chart, I’ve shown the sinusoidal decline cycle to 1.1603 (67 degrees). This is the ideal scenario for today as we await the results of the Fed’s July meeting. The meeting is unlikely to be accompanied by any renewed economic forecasts or press conferences, so its effect will be limited to the currency market. The Stochastic is in the sell zone, so it would be nice to see this correctional movement continue and see the third wave complete its formation. If the price consolidates below 1.1617, then sellers may take 1.1575 as a target. This correction will get stronger after a sustained rally for the euro.


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