On Wednesday the euro versus the US dollar looked very volatile, though it was not able to show any trend.
During the European session EUR/USD hit the maximum around 1.2725 after the level of business confidence in Germany appeared above the experts’ expectations. In the second half of the day the European Common currency lost the gained positions in favor of the US dollar which was caused by Ireland’s rating downgrade.
However, the trade ended up for the euro, as it strengthened versus the US dollar by 29 pips, the volatility amounted to 117 pips.
Fundamental Review
As it was stated above, the business confidence in Germany in August of the current year continued to increase. According to the survey held by the research institute Ifo, business sentiment in Germany uprose to 106.7 against 106.2 in July. The analysts forecasted business sentiment at 106.0.
The pressure on the euro was caused by the concerns related to peripheral countries of the euro area, after the rating agency Standard & Poor's Ratings Services downgraded the rate of Ireland to AA-.
As to the USA statistics, it should be mentioned that durable goods orders in the US have ascended, though at a slower pace than expected by the experts. In accord to the US Department of Commerce, the orders for durable goods seasonally adjusted climbed in July by 0.3%, hitting $193.02 bln., whereas the economists were expecting the growth by 2.8%.
The orders for transport machinery surged in July by 13.1% and orders for cars and SP added 5.3%.
The negative influence had the data on construction permits which in July reduced by 4.1% compared to June and seasonally adjusted, amounted to 559,000 annually. The primary data was that the indicator fell by 3.1% and equaled to 565,000 seasonally adjusted.
The new houses sales in the US decreased in July as well as the existing home sales. The released data show that sales of homes per one family in the USA in July declined by 12.4% m-on-m and amounted to 276K of houses a year. The forecast was for growth by 0.9% to 333K.
Technical Analysis
Taking into account that yesterday the pair did not manage to reach a fresh week low and the day maximum appeared above the peak of Tuesday, trading has acquired new look and now it is held in the ascending price channel, which is developed on August 24.
The lower limit of the channel passes the minimums of 1.2589 and 1 .2609 and the upper border is formed near the maximum of August 24 - 1.2720.
The area 1.2730 is the first resistance level, from which the growth can continue to the area of 1.2770, and to 1.2823 thereafter.
If the pair starts to decline again, the support level will be at 1.2694, from which a falling will deepen to 1.2659 and 1.2619.
The Bollinger Bands are parallel, though the liquidity remains on the market, which can cause the further sharp behavior of the pair. The trading is help in the upper zone of the range and the average line placed around 1.2669 acts like a dynamical support.
The MACD is situated in the sell area, in case of the pair’s plunge a new upward spike is likely.
Recommendations for today
Support Levels: 1.2694, 1.2659, 1.2619
Resistance Levels: 1.2730, 1.2770, 1.2823
Today I recommend buying at closing by the timeframe above 1.2723 with a target – T/P 1.2792 and S/L 1.2698
It is possible to sell at closing by the timeframe of the pair below the mark 1.2664 with a target of T/P 1.2613 and S/L 1.2689
Performed by Maxim Magdalinin, Analytical expert
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