On Friday, the euro rose to a new monthly high against the U.S. dollar. The advance was sustained by less favorable U.S. economic reports than it had been expected, which caused a new wave of speculations that slowdown in economy recovery could make the Federal Reserve System to take tighter measures.
On the Asian session and in the first part of the European one, the greenback had gradually been strengthening versus the euro, however after more positive statistical data on Germany the pair managed to continue rising.
The trades closed with an advantage of the European currency, which edged up against the buck by 175 points, the trading volatility totaled 210 points.
Fundamental review:
In Q2, the French economy increased faster than it had been estimated earlier. According to Statistics Office Insee, the GDP of the country gained 0.7%, compared to the previous quarter, while experts had been expecting a 0.6% growth.
Retail sales in Italy remained unchanged in July over the prior month, but they turned out to be better than expectations. The improvement was due to the increase in food sales. In accordance with National Statistical Office Istat, retail sales rose by 1.7% in July, compared to the same month of the preceding year, while economists had been anticipating a 0.2% fall.
The European currency was supported by Germany’s business confidence index, which unexpectedly moved up in September. According to the survey by Ifo, the German business sentiment index surged by 106.8 from 106.7 in August. Analysts had been expecting the index to drop slightly to 106.5 points.
The current conditions index was up to 109.7 from 108.2 in August, while the expectation index fell for the second sequential month to 103.9 from 105.2.
The U.S. disappointing fundamental statistics led to another weakening the U.S. dollar. As it was known on Friday, the U.S. durable goods orders dropped more-than-expected in August. The U.S. Commerce Department reported that the durable goods orders shrank 1.3% to USD 191.17 bln. Economists had been forecasting a 1% decrease.
The U.S. new house sales turned out to be below expectations in August. As the U.S. Commerce Department said the single house sales were unchanged in comparison with the previous month and totaled 288,000 units per year.
Economists had been anticipating the August sales to increase by 6.9% to 295,000.
Technical analysis:
The uprising movement keeps on. Now, the trading is held in a new channel, which is developed due to the Friday’s growth. The lower limit of the channel goes through the Friday’s low of 1.3286. The upper limit is placed around the high of 1.3439 from September 22 and the high of 1.3494 from the last Friday.
The important psychological level of the 35th pattern is the first resistance level for the pair. From this level the growth can continue to 1.3536 and 1.3583. Bollinger bands are up-directed, but they are extremely converged, speaking for the low market volatility. The trading is driven in the upper part of the channel and the middle band placed at 1.3467 is dynamic support.
I would like you to pay attention to the fact that the Friday’s high on MACD indicator did not managed to break the high from September 22, that clearly indicates near correctional movement of the pair in medium-term outlook. The indicator itself is in the purchase area now, however, I do not recommend opening long positions in case of the pair slide.
Today’s recommendations:
Support levels: 1.3438, 1.3398, 1.3359.
Resistance levels: 1.3493, 1.3536, 1.3583.
Today it is advisable to buy the pair at a 1-hour timeframe closing above the level of 1.3498 with a target - T/P 1.3572 and S/L 1.3465.
It is possible to sell at the closing of a 1-hour timeframe below 1.3435 with a target – T/P 1.3367 and S/L 1.3475.
Performed by Maxim Magdalinin, Analytical expert
InstaForex Companies Group © 2007-2010
