The euro headed down after being flat for a while despite an empty macroeconomic calendar and the relevance of a correction.
Data on the eurozone trade balance went unnoticed, although the trade surplus came at EUR 7.3 billion in September compared to a forecast of EUR 10.7 billion. Moreover, the previous results were downwardly revised to EUR 3.5 billion versus EUR 4.8 billion.
Anyway, the market has never been interested in the trade surplus or deficit size, especially regarding the eurozone or the United States. Therefore, it came as no surprise that the market was flat at the time of the publication.
A plunge in the euro came later when European Central Bank (ECB) President Christine Lagarde delivered a speech. She said that the regulator would keep its loose stance on monetary policy for a long time and stressed that the ECB could raise interest rates as early as 2023. According to Christine Lagarde, amid an economic recovery, any monetary policy tightening is highly undesirable.
Generally speaking, Lagarde did not say anything new in her speech. All ECB representatives have been talking about it for a while. At the same time, inflation in the EU is rising, and the only way out is to tighten monetary policy. Nevertheless, the European regulator prefers doing nothing. In addition, Christine Lagarde noted that inflation would continue to grow and remain at record highs for a long time. Despite further inflation, the ECB's inaction is the only reason for the euro's continuing downward spiral.
The eurozone macroeconomic statistics set to be published today, including GDP, will be ignored by market participants. The second estimate of the Q3 GDP growth rate in the region is expected to come in line with the first one. The reading should confirm a slowdown in the GDP growth rate to 3.7% versus 14.2%. So, investors are unlikely to react to the results.
Meanwhile, data published in the United States could boost the greenback as retail sales in the country are estimated to drop to 12.0% from 13.9%, showing a decrease in consumer confidence, the engine of the American economy. At the same time, the reading indicates a continuing low base effect. Consequently, the annual results will be less informative than the monthly data, with a possible 1.2% rise in retail sales.
Despite soaring inflation, consumer confidence is still increasing. However, the greenback's growth potential could be limited by a possible 3.9% slowdown in industrial production growth from 4.6% in the previous period. Nevertheless, it is about limiting the US dollar's growth potential and not about a trend reversal.
After being flat for a while, the downward trend on EUR/USD resumed. As a result, the price broke the support level of 1.1400 and approached 1.1356.
The Relative Strength Index (RSI) fell below 19 for the first time since mid-June, signaling that the euro is highly oversold. On the daily chart, there is a reversal signal for the mid-term trend. Consequently, it could lead to a plunge in the euro.
Outlook
The quote may well rebound to 1.1400 due to the highly overbought status of the euro. At the same time, speculators are fueling the bearish interest. An increase in the volume of short positions is likely to occur if the quote consolidates below 1.1350.
As for complex indicator analysis, technical indicators are signaling to buy the pair for short-term trading. There is also a sell signal on the H4 and daily chart.