It was not surprising that the final data on Purchasing Managers Index numbers from Europe turned out to be worse than forecasts. Investors were generally prepared for this outcome. But what really had an impact on the market was the producer price index. Prices at factory gates were down 1.5% year-on-year. And this means that inflation will continue to decline. That's enough to weaken the single currency, which started to fall after these reports. But the scariest thing is that the European Central Bank continues to pursue a strict monetary policy and intends to continue raising interest rates. While inflation dynamics suggest the need for a slightly different policy.
Today, the focus will be on retail sales in the eurozone, the rate of decline of which should accelerate from -2.6% to -3.2%. That is, it shows that the European economy is confidently sliding into recession. And the ECB's aggressive policy only reinforces this trend. However, by the end of the day, the single currency may not move much at all. Of course, after the retail sales report, it will fall somewhat, but then it will return to the values at the start of the trading day. The reason will be the US employment report. It is assumed that it will only grow by 160,000. Given the demographics in the United States, this is not enough to maintain labor market stability. Employment should be growing by more than 200,000 per month. So ahead of the release of the U.S. Department of Labor report, such data can clearly hint at the possibility of an increase in unemployment. Which of course can weaken the dollar.
During the downward movement, the EUR/USD pair extended the corrective move from the resistance level of 1.1000.
On the four-hour chart, the RSI indicator is moving in the lower area of 30/50, indicating an increase in the volume of short positions.
On the same time frame, the Alligator's MAs are headed downwards, which corresponds to the direction of the corrective cycle.
OutlookIn this situation, keeping the price below the 1.0840 mark allows for a subsequent downward movement, at least to the level of 1.0800. However, in case the price stalls around 1.0840/1.0850, the euro could rebound, similar to what we witnessed last week.
In terms of complex indicator analysis, indicators show a corrective cycle in the short term and intraday periods.