EURUSD continued its consolidation last week. The pair went as low as 1.3353 before closing for the week at 1.3365.
Recent economic data from U.K. and the United States:
- Factory Orders (MoM): 1.8% and though less than the consensus of 2.2% but quite better than the previous -0.3%.
- ISM Non-Manufacturing PMI: 55.2, negative as compared to the forecasts (55.8) as well as the previous 56.1.
- Initial Jobless Claims: 366K and though higher than the expected 360K but less than the previous 371K.
- Consumer Credit Change: USD 14.59 billion and though more than the consensus of USD 13.40 billion but less than the previous 16.05 billion US dollars.
- Trade Balance: USD -38.54 billion, quite positive as compared to the forecasts (USD -46.00 billion) as well as the previous -48.61 billion US dollar.
- Sentix Investor Confidence: -3.9 and though less than the market consensus of -3.0 but better than the previous -7.0.
- Producer Price Index: Year on year change 2.1% was same as the previous though slightly less than the forecasts of 2.2%. Month on month change remained same as the previous release and the consensus of -0.2%.
- Markit Services PMI: German data 55.7 and positive as compared to the forecasts (55.3) as well as the previous 52.0. Same with the Euro zone service PMI which was 48.6 against the expected 48.3 and previous 47.8.
- Retail Sales: Year on year change -3.4% and quite negative as compared to the forecasts (-1.1%) as well as the previous -1.9%. Same with the month on month change which was -0.8% against the consensus of -0.3% and previous -0.1%.
- German Factory Orders: Year on year change without seasonal adjustment was -1.8% and negative as compared to the forecasts (-1.2%) as well as the previous -0.9%.
- German Industrial Production: Year on year change -1.0% against the previous -2.9%.
- Interest rate was kept same at 0.75%.
- German Trade Balance: EUR 16.8 billion, positive as compared to the forecasts (EUR 14.8 billion) as well as the previous 14.6 billion euro.
The economic data is keeps the neutral picture for the pair if we see the relative strength in graphical form:
The overall outlook of EUR/USD is not bearish and we are taking the recent moves just as a correction. The strong fall below 1.3500 suggests that the downward consolidation should continue a bit more before any upward moves take place. Below 1.3353 the pair should find a minor support at 55-day EMA i.e. in the range of 1.3319/1.3325. The current 55-day EMA is 1.3319. As mentioned in this EURUSD update, the recent supports have been coming near 75-days EMA. Considering this we expect a move towards 1.3256. With the recent support trend we would expect a strong support near this level but in case there is a decisive break of this support the further downward move towards 1.3060/1.3075 cannot be ignored. Such a move will represent the 38.2% retracement of the upward journey from 1.2042 to 1.3711, as mentioned in the above mentioned update.
On the upside we would expect resistance below 1.3460. Please note that during last week a good support had come at 1.3458 and this support is expected to act as resistance now. The psychological resistance of 1.3500 would also come into picture here. In case there is a decisive break over 1.3560 then the above outlook will start neutralizing and a better indication of the same will come with any break over 1.3500. On the upside if such a move takes place then EUR/USD should target a retest of the recent 1.3711. Not for the next week but overall, if any break over the recent 1.3711 takes place then on the upside we expect a move towards 1.3769 to 1.3833 resistance zone. Please note that 1.3769 was the low of the resistance zone during November 1st to November 15th, 2011. While a move to 1.3833 will represent 61.8% retracement of the downward move from 1.4940 to 1.2042. Please check the alerts in the Forex forum for the details. Any decisive break over 1.3833 should target a test of the strong psychological level of 1.4000.
By: Himanshu Jain
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.