All in all, it came as no surprise. The euro was clearly overbought, and a correction was needed. In this light, an empty macroeconomic calendar could have helped.
However, the European Union was clearly determined to impose an embargo on Russian commodity supplies. If not for the resistance of some member states, like Hungary, the decision would have happened.
The fact that this issue is still in the air is limiting the growth potential of the euro. A ban on Russian energy supplies would imply a substantial hit to the European economy. Moreover, the EU is still looking for alternatives to commodities from Russia. Therefore, the euro is likely to remain under pressure until a new package of sanctions is announced.
In the eurozone, the second estimate for Q1 GDP will be published. The economy is forecast to expand to 5.0% versus 4.7%. Since the reading should come in line with the first estimate that has already been priced in, it is unlikely to somehow affect the market.
Eurozone GDP Growth Rate:
In the United States, retail sales are projected to fall to 4.2% from 6.9%, and industrial production could drop to 2.0% versus 5.5%. In light of disappointing data, the dollar might feel pressure. Given that the dollar is heavily overbought, this is actually what the market needs right now.
United States Retail Sales:
The uptrend on EUR/USD has resumed, leading to a full-fledged correction in the market.
The RSI has reached the level of 50, signaling a decrease in the volume of short positions. Meanwhile, the volume of long positions is expected to increase when the indicator crosses the level of 50 from top to bottom.
The downward cycle is slowing down, which is indicated by the crossover of the Alligator’s green and red MAs on the H4 chart. At the same time, the downtrend is still strong on the daily chart, with the MAs moving down.
In the daily time frame, in spite of the current corrective move, there is still a bearish signal.
Outlook
In light of the corrective move, the quote could return to 1.0500, in line with resistance. If so, bears might break through the 2016 swing low of 1.0325.
Consolidation above 1.0500 in the daily time frame might lead to a flat in the range between 1.0500 and 1.0600.
In terms of complex indicator analysis, there is a buy signal for short-term and intraday trading due to the correction. In the medium terms, there is a sell signal because of the general trend.