During the European session yesterday, EUR/USD was trading differently than in the previous days. The single European currency was gaining ground, but not trading sideways. EUR has two reasons to regain its footing.
First, the EU is evidently unwilling to impose embargo no Russian energy imports. Indeed, if the EU decided to give up Russian coal imports, this decision would aggravate already ailing economic conditions in Europe. Energy prices have been soaring at incredible highs whereas consumer inflation has surged to the strongest levels in almost 4 decades without any signs of loosening its grip. If the EU slashes coal imports, these two problems would fester dramatically. Moreover, it would lead to the shutdown of a large number of factories which have already operating at lower capacity.
Second, traders felt relieved to get to know macroeconomic data for the EU. They were pleased that the actual data was not as dismal as expected. The annual PPI grew to 31.4% from 30.6%. Economists had projected a large 36.0% increase. In fact, the recent EU macroeconomic data had been disappointing with actual readings worse than poor forecasts. So, the actual PPI is viewed as entirely positive.
EU Producer Price Index
Nevertheless, in the early New York trade, the currency pair turned downwards and retraced to the opening levels. American traders are bearish about the single European currency.
Speaking about the forecast for today, there is a slim chance of the same scenario as yesterday. In the best case, EUR will be trading sideways in the European session. Realistically, it will be trading lower due to downbeat EU retail sales data which is due later today. Retail sales could have tumbled to 6.2% from 7.8% on a yearly basis in the most optimistic scenario. Traders could be discouraged again about European metrics.
EU Retail Sales
Commonly, traders monitor weekly updates on US unemployment claims that are released on Thursdays. The number of initial jobless claims could have increased by a minor 3,000 last week whereas the number of continuing application for unemployment benefits is expected to rise by 8,000. Such minor changes will be of no importance to market sentiment.
US Continuing Unemployment Claims
EUR/USD slightly stalled a downward move at nearly 1.0900. The price tried to rebound, but the climb was measured at 50 pips.
The 4H RSI technical instrument managed to escape from the overbought zone, having crossed the level of 30 downwards. This could signal changing market sentiment.
The H4 and D1 Alligator indicator signals a downward cycle as moving averages are pointing downwards.
The daily chart reveals that USD has advanced by more than 75% against its correction from 1.0800.
Outlook and trading tips
Despite the temporary flat market, traders are still poised to go short on EUR/USD. If the pair settles below 1.0875 on the 4-hour chart, traders will open more short positions with the target at 1.0800 which serves as support.
The alternative scenario will come into play if the price settles above 1.0950. In this case, the pair could make a strong upward retracement towards 1.1000. Complex indicator analysis generates mixed signals for the short-term trading and for intraday because of sideways trading. Indicators suggest selling in the medium term because of the overall downtrend.