EUR/USD continues to extend its weakness but not as rapidly as it was a few days ago. Yet, it has considerably dropped in value and looks clearly oversold now. So, it is hardly surprising that the local correction is becoming more likely. However, the macroeconomic data from the US makes it less possible.
Just at the moment when the data on residential construction in the US was published, activity in the market surged, and the euro started to fluctuate wildly, with strong attempts to move higher at first. The reason for this is a 5.1% decline in the number of issued building permits in the US. This means that construction volumes will decrease which in turn could lead to a drop in industrial production.
So, this is definitely a bearish factor for the US dollar which favors the strengthening of the European currency. At the same time, this scenario is relevant only in the near future. Meanwhile, construction of new homes in the US went up by 6.3% which largely offsets the negative factor of a reduced number of building permits. In other words, there is nothing critical in the fact that construction volumes will slightly decline next month. That is why the US dollar continued to gain ground.
But in general, the greenback has slowed down its pace of growth and is about to start a correction since no macroeconomic data is expected today. Tomorrow, the meeting of the European Central Bank will take place. Markets pin high hopes on the meeting which is likely to push the euro higher.
New Residential Construction (United States)
Yesterday, the EUR/USD pair managed to test the resistance level of 1.1800. As a result, the quote moved towards the area of 1.1755.
The market is still in the acceleration mode which is confirmed by the structure of candlesticks and the ratio of speculative trades.
Currently, the price shows a slight slowdown in the downward movement. However, the quote is still holding below the level of 1.1800.
Therefore, we can conclude that the bearish sentiment is still in place. To extend the downward momentum to reach new levels, the price needs to settle firmly below 1.1750. Otherwise, the pair may get stuck in the range of 1.1760/1.1800.
According to comprehensive indicator analysis, all technical tools are confirming the sell signal.
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