On Tuesday, the European currency fell from a 10-week high versus the US dollar because investors’ behavior became cautious ahead the European banks stress tests results release which is due July 23.
On early European deals on Tuesday, the EUR/USD pair hit new 2-month high of 1.3029. The euro was supported by Germany’s PPI data, which turned to be a lot better expert forecasts.
However, afternoon, the euro started falling sharply, having recorded the low of 1.2838.
The trading day closed in favor of the American dollar, which strengthened by 62 points against the euro. The trading volatility totaled to 190 points.
Fundamental review:
According to fundamental data, the German Producer Prices rose significantly in June. Following the report released on Tuesday, the German PPI increased by 0.6% in June compared to the previous month and edged up by 1.7% annually.
The expert expectations were the growth of 0.2 and 1.2% respectively.
The core PPI, which excludes energy and food prices, ticked up by 0.3% m-o-m and by 2.1% y-o-y.
In the USA new houses construction decreased to the lowest level since October 2009 in June. Sales decline is related to concessional lending programs termination.
In accordance with the US Commerce Department, new housing starts fell by 5% to 549K compared to the preceding month, while analysts were predicting a smaller decline.
Construction permits rose by 2.1%, to 586K in the prior month. Single-family homes permits, which are majority on the market, have moved down by 3.4% to 421K, having reached the lowest mark since April 2009.
Technical analysis:
Having hit a new local low during yesterday’s trading, the pair formed new short-term downward price channel from July 19. The upper limit goes through yesterday’s high. The lower limit of the channel is supported by the low of 1.2870 from July 19 and the yesterday’s low of 1.2838.
EUR/USD has also breached the 50 day exponential moving average downwards, which presently lies at 1.2909 area and hold the pair from the further growth.
To continue falling, the trading instrument is to decline below the support level of 1.2866, which will open the way to 1.2779 and then to 1.2721.
Bollinger bands reversed downwards on yesterday’s deals, however, they strongly converged to each other during today’s Asian session, indicating the low market volatility. The trading is held in the lower part of the channel and the mid band placed at 1.2889 area holds the pair from the further rise.
MACD is in the purchase area, but it is hard to speak about straight and well-defined decrease of the pair in short-term outlook.
Today’s recommendations:
Support levels: 1.2866, 1.2779, 1.2721.
Resistance levels: 1.2927, 1.3006, 1.3120.
Today it is advisable to buy the pair at 1-hour timeframe closing above the level of 1.2910 with a target - T/P 1.2963 and S/L 1.2887.
It is possible to sell at the closing of 1-hour timeframe below 1.2872 with a target – T/P 1.2803 and S/L 1.2900.