EURUSD: dip expected following correction

Previous:

On Friday the 14th of December, the euro fell to 1.1270 during the US session. The weakening of the euro was due to the publication of disappointing data concerning economic activity in the areas of manufacturing and services in the Eurozone and Germany, as well as the dollar rally against the background of favourable data in retail sales and industrial production in the US.

The industrial production index in the US for November was 0.6% (forecast: 0.3%; previous: -0.2%).

The volume of retail sales for November was 0.2% (forecast: 0.2%; previous: 1.1%).

According to Markit, the business activity index in the manufacturing sector in the US was 53.9, and in the services sector - 53.4. They were forecast to reach 55.1 and 534.7.

Day's news (GMT+3):

  • 13:00 Eurozone: CPI (Nov), trade balance (Oct).
  • 14:00 Germany: Buba monthly report.
  • 16:30 Canada: Canadian portfolio investment in foreign securities (Oct).
  • 16:30 US: NY Empire State manufacturing index (Dec).
  • 18:00 US: NAHB housing market index (Dec).

Fig 1. MA channel on the EURUSD hourly chart.

Current situation:

Sellers have broken through two supports (1.1341 and 1.1318). The first support is a trend line passing through the lows at 1.1306 - 1.1331, the second through the lows at 1.1367 and 1.1306.

Upon reaching 1.1270, the price corrected to 1.1308. On Monday, during Asian trading buyers shifted to a high of 1.1313. The price may move up slowly to 1.1323. There is a resistance on top of this level which acted previously acted as a support at the 45th degrees. Given that there is no bullish divergence between the AO indicator and the price, according to the forecast, I expect downward movement from the pair to 1.1270. Ideally, it would be nice to update and test the low and 112th degree. Now the price is positioned under the 4-hour period (the stochastics are back in the sell zone).

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