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The Euro Rushed to the Local Lows of Last Week

2/21/2023 10:48 AM

The EUR/USD pair shows a moderate decrease, aiming at the previous local lows, which were updated at the end of last week, before the euro went into a slight upward correction. Traders are in no hurry to open new trading positions, preferring to wait for new drivers to appear at the market.

Today, investors will follow the publication of the February statistics from S&P Global on the level of business activity in Europe and the US. Forecasts for European data are cautiously optimistic: it is expected that the Manufacturing PMI for the eurozone will strengthen from 48.8 points to 49.3 points, and the Services PMI may strengthen from 50.8 points to 51.0 points. The Composite Manufacturing PMI may show an increase from 50.3 points to 50.6 points. In turn, US statistics may also reflect the appearance of moderate positive dynamics: the Manufacturing PMI is likely to correct from 46.9 points to 47.3 points, and the Services PMI may adjust from 46.8 points to 47.2 points.

The day before, investors estimated the December data on Construction Output: the indicator fell by 2.52% for the eurozone countries and by 2.0% in all EU countries. Higher borrowing costs and soaring inflation, as well as supply disruptions, are putting pressure on the sector, despite the fact that overall forecasts for the region's economy have improved significantly recently and experts now believe that it can avoid a recession. The Governor of the Bank of Finland, Olli Rehn, believes that it is expedient for the European Central Bank (ECB) to continue adjusting the interest rate after the March meeting, despite the decline in inflation, and the ceiling value will probably be reached in the summer. Investors are confident that by the end of August the figure will be in the region of 3.7%, and in 2024 it will begin to decline.

Tomorrow, statistics on Consumer Price Indices in Germany will be published and on Thursday, February 23, data on the CPI in the euro area as a whole will be released. At the moment, analysts are counting on a slight increase in inflation in January from 8.5% to 8.7% in annual terms, while in monthly terms the negative dynamics is likely to remain at the level of -0.4%.

Bollinger Bands on the daily chart show a steady decline. The price range is narrowing, reflecting the emergence of ambiguous dynamics of trading in the short term. MACD is falling, keeping a relatively strong sell signal (the histogram is below the signal line). Stochastic, on the contrary, keeps an upward direction, and has not yet reacted to the attempts of the "bears" to seize the initiative at the beginning of the week.

Resistance levels: 1.0700, 1.0765, 1.0800, 1.0850. | Support levels: 1.0654, 1.0600, 1.0550, 1.0500.

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