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Euro Trades In A Predictable Fashion

By InstaForex GroupForexJan 25, 2022 05:57AM ET
www.investing.com/analysis/euro-trades-in-a-predictable-fashion-200615849
Euro Trades In A Predictable Fashion
By InstaForex Group   |  Jan 25, 2022 05:57AM ET
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Yesterday, the euro moved exactly as it should, given the forecasts published that day. Generally speaking, the data came out worse than expected. In particular, the Eurozone manufacturing PMI rose to 59.0 from 58.0.

The reading had been estimated to decline to 57.1. Meanwhile, the services PMI dropped to 51.2 versus 53.1, below the market consensus of 52.4. Likewise, the Eurozone composite PMI declined to 52.4 from 53.3.

It came slightly below market expectations of 52.6. As a result, the single European currency went down. The euro should have decreased in any case, given the initially gloomy outlook.

Eurozone composite PMI.
Eurozone composite PMI.

After the opening of the US session, the euro returned to the levels it had started the day at, which was also in line with expectations. Pessimistic business activity results were also published in the United States.

Thus, the manufacturing PMI fell to 55.0 versus 57.7, well below the market consensus of 57.0. The services PMI plunged to 50.9 from 57.6.

The reading had been projected to drop to 56.0. As a result, the composite PMI tumbled to 50.8 versus 57.0. It had been estimated to decline to 56.7.

US composite PMI.
US composite PMI.

The macroeconomic calendar will be empty today. For that reason, the market is likely to be flat. The FOMC meeting will take place tomorrow.

Market participants have no clue how it may end. So, there could be any speculation as to its outcome. Speculation in the market is likely to increase as soon as the US session opens.

Since no policy changes are expected in the course of this meeting, speculation will be aimed precisely at the strengthening of the dollar, so that market players could push the currency down tomorrow when the FOMC meeting is over.

The euro has lost more than 170 pips versus the dollar over the past one and a half weeks. Consequently, the downtrend resumed.

The Relative Strength Index (RSI) is moving within the 30/50 range on the 4-hour and daily charts, signaling growing bearish sentiment.

The Alligator indicator shows an intersection of the moving averages (MA) on the daily chart, meaning that the corrective move has stopped.

On the 4-hour chart, the indicator is moving down. According to the daily chart, the dollar is recovering, which increases the likelihood that the downtrend that emerged in early June 2021 will continue.

Outlook

The downtrend is expected to extend with the target seen at 1.1270, where the volume of short positions decreased earlier. In case of a break out there, the quote may head towards 1.1230.

There is a sell signal for short-term and intraday trading based on complex indicator analysis. Technical indicators are also signaling to sell the instrument in the intermediate terms.

EUR/USD H4 chart.
EUR/USD H4 chart.

InstaForex Group

Euro Trades In A Predictable Fashion
 

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Euro Trades In A Predictable Fashion

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