FX.co ★ Hot forecast for EUR/USD on December 18, 2023

The preliminary assessment of eurozone business activity fell much more than expected. The only exception was the manufacturing sector business activity index, which, instead of increasing from 44.2 points to 44.4 points, remained unchanged. However, the Services PMI decreased from 48.7 points to 48.1 points, while it was expected to increase to 49.3 points. Consequently, the composite PMI, which was supposed to rise from 47.6 points to 48.0 points, had in fact decreased to 47.0 points. Given such weak results, it is not surprising that the euro immediately started to drop.

The pair continued to fall even after the opening of the US session, although the PMI data for the United States turned out to be slightly better. The Manufacturing PMI was particularly concerning, as it plummeted from 49.4 points to 48.2 points, against a forecast of 49.2 points. However, the situation was rectified by the Services PMI, which, instead of decreasing from 50.8 points to 50.7 points, rose to 51.3 points. Therefore, the composite PMI managed to grow from 50.7 points to 51.0 points, against expectations of a fall to 50.5 points. However, there is still the US industrial production, the pace of decline of which slowed from -1.0% to -0.4%, which was slightly worse than the forecast of -0.3%.

In general, the euro's decline, while mostly justified by economic reports, looks more like a simple rebound after a rapid rise. Moreover, from a technical perspective, the local correction has already ended, as the dollar has recouped exactly half of the previous losses. Today, the economic calendar is empty, and the market is likely to consolidate around the achieved values.

The volume of long positions on the EUR/USD pair decreased around the resistance level of 1.1000. As a result, the quote returned to the level of 1.0900.

On the 4-hour chart, the RSI indicator left the overbought territory. However, the RSI is still hovering in the upper area of 50/70, which points to the bullish sentiment.

On the same chart, the Alligator moving averages have slowed down the upward movement but are still pointing upwards.

Outlook

Keeping the price above the 1.0900 level could indicate an increase in the volume of long positions. In this case, the pair could rise towards the 1.1000 level. However, keeping the price below the 1.0900 level during the day may lead to further downward movement, reversing the recent uptrend.

The comprehensive indicator analysis in the short-term and intraday periods suggests a bearish signal. Indicators also signal an uptrend in the medium term.