FX.co ★ Analytical review of the EUR/USD currency pair with the forecast for Thursday (Jan 21)

The American dollar did not leave the Euro any chances during the trades on Wednesday, due to new conversations about Greece problems and weak macroeconomic data.

From the first minutes of the Asian trades the US dollar continued its strengthening against the single currency and rebounded 111 points to the opening of the European session, the most part of which the pair was trading in the channel of 1.4162-1.4220.

With the entering of the American investors to the market, nothing had changed. Despite the mixed fundamental statistics on the inflation, the European currency tried to gain its positions back, but it led to the new US dollar increase.

Totally, the EUR/USD currency pair dropped by 182 pips from Tuesday\'s closing level. The trading volatility came to 218 points.

Fundamental review:

The German Producer Prices Index in December 2009 decreased by -0.1% and by -5.2% y/y. Analysts predicted the growth of this indicator by +0.2% and the decline only by -5.1% from the previous year.

The Member of the Executive Board of the European Central Bank Jürgen Stark stated yesterday that some banks of the Euro – zone are still dependent on the expansionary actions. He also mentioned that he observes the deterioration signs of credits quality which may cause a new wave of write-downs.

After the publication of the US fundamental statistics which consist of the inflation reports and construction sector data, the pair slightly changed its direction, but the European currency upsurge had lasted not so long.

The US Housing Starts in December, 2009 decreased to 557 000, compared to the experts expectations, who were waiting for this index to come at 580 000. In November this indicator was revised from 574 000 to 580 000.

The Building Permits in December, 2009 turned out to be at 653 000 from analysts predictions of 580 000. Within November this figure is revised upwards from 584 000 to 589 000.

Speaking about the inflation, I want to add that the PPI in the USA for December, 2009 rose by +0.2% and by +4.4% from December, 2008. Analysts were looking for that this index would remain unchanged at the level of +0.0%, compared to the forecast of +0.1%.

Technical picture:

A strong descendant trend is observed on the pair, starting from January, 19. The trade is conducting in downstream channel, the high is at 1.4412. Currently the pair is quoting near the low border of this channel, which is located at 1.4087.

The exponential moving averages also point us to pair\'s decline continuation in the short – term outlook, but it should be mentioned that the further decrease will not be possible without a definite correction in favor of the European currency.

Bollinger bands are continuing to point to the reduction, however, during today\'s early trading, the liquidity is gradually lowering, which says us about a possible sideway motion.

MACD indicator has not fixed the divergence at the market yet and is keeping to come down together with the pair\'s fall to new lows.

I want to turn your attention to the moment that the pair has dropped by 344 points without any correction since January, 19, just then the correctional motion was finished after the decline from January, 13.

Today\'s recommendations:

The support levels: 1.4061, 1.406, 1.3936.

The resistance levels: 1.4162, 1.4255, 1.4306.

Today I recommend to buy the pair at 1 - hour timeframe closing above the level of 1.4137 with the target — T/P 1.4204 and S/L 1.4078.

Sell the pair at 1 - hour timeframe closing below the level of 1.4060 with the target — T/P 1.3995 and S/L 1.4102.

Best regards,

Analyst: M. Magdalinin.