The euro stopped surging before the NYSE open, despite the downbeat data on construction in the US.
New residential housing starts went down by 1.6%, while analysts expected a 0.9% decline. Moreover, new building permits in the United States plummeted by 7.7% instead of the forecasted 1.8%. Construction volumes could decline further.
The US dollar should have eased amid such a negative background. However, it advanced slightly instead. The euro demonstrated a rapid surge after the industrial production data in the US was out. This resulted in the euro becoming overbought.
So, the euro fed on the weak macroeconomic data in the US. Meanwhile, the situation in Europe is not any better. In particular, the inflation rate in the Eurozone accelerated to 3.4% from 3.0%. The European Central Bank (ECB) will not take any action despite a continuing rise in inflation.
Such a stance of the central bank raised concern in the markets. It is also one of the main reasons for a prolonged decline in the euro, which started in August. So, it is too early to say that the uptrend in the US dollar is over.
EUR/USD - Technical View
After a short break, the EUR/USD pair resumed its uptrend to test the local high of Oct. 4 at 1.1640. The technical RSI indicator generated a robust overbought signal on the euro on the 1-hour time frame.
The indicator jumped to 81.66, where the volume of long positions had sharply reduced. As a result, the pair went through a technical pullback from the local high of 1.1669. If we take Fibonacci levels, the level of 38.2 served as resistance for placing long positions.
The pair has been in a downtrend on the daily chart since the corrective movement from Oct. 13 to Oct. 19.
Outlook
A technical pullback gave way to a flat movement which can be the first sign indicating that the market sentiment will change. In this case, waiting for a breakout of any pivot points is considered the most suitable strategy. This can determine a further movement of the price.
We can consider opening long positions on the pair as soon as the price holds above the level of 1.1670. Short positions will become relevant if the quote settles below 1.1625. Comprehensive indicator analysis confirms a sell signal on the short-term and daily time frames due to the technical pullback.