EUR/USD: upwards correction expected to continue

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On Wednesday, trading on the euro closed up. After the release of statistics in the US, the euro fell to 1.0521. The first set of released figures was excellent news for the dollar. Inflation and retail sales exceeded expectations and US 10-year bond yields reached 2.5238%.

The index for industrial production was released later in the day, which had a negative value, to everyone’s surprise. In addition, the figure for the previous month was downgraded, 10-year bond yields reversed downwards and the EUR/USD rate restored to 1.0609.

US statistics:

• The NY Empire State Manufacturing Index for February came out at 18.7 (forecasted: 7.5, previous figure: 6.5).
• The index for retail sales for January came out at 0.4% (forecasted: 0.2%, previous figure: 1.0%).
• The index for non-auto retail sales for January was 0.8% (forecasted: 0.4%, previous figure: 0.4%).
• The Consumer Price Index for January was 0.6% (forecasted: 0.3%, previous figure: 0.3%). The Consumer Price Index for January excluding food and energy came to 0.3% (forecasted: 0.2%, previous figure: 0.2%).
• The index for industrial production fell to -0.3% (forecasted: 0.1%, the previous figure was downgraded from 0.8% to 0.6%).

Market expectations:

The euro is continuing to strengthen in Asia. On the hourly timeframe, buyers  have broken through the trend line. The EUR/USD rate rose to 1.0623. Then, the dollar started to undergo a correctional phase. The immediate target is 1.0650. For Thursday, there’s nothing important expected in the news. Traders will be basing their decisions on the dynamics of US bond yields, which are down by 0.66% at the moment.

Day’s news (GMT+3):

• 16:30 USA: building permits (Jan), Philadelphia Fed manufacturing survey (Feb), jobless claims (3-10 Feb), housing starts (Jan);
• 17:00 Eurozone: ECB board member Benoît Cœuré’s speech;
• 18:30 USA: EIA natural gas storage change (Feb 10).

EURUSD rate on the hourly. Source: TradingView

Intraday forecast: low: 1.0590 (current in Asia), high: 1.0650, close: 1.0632.

For the most part, my predictions for yesterday came off. The strong US statistics knocked the projected minimum from 1.0555 down to 1.0521, but after the release of the disappointing manufacturing statistics, the dollar began a downwards correction.

As US bond yields slid, the EUR/USD rate restored to the trend line. It also came out of the Asian market in good shape. At the time of writing, the euro is trading at 1.0621. Growth slowed around the 90^th degree at 1.0624. The 90^th degree isn’t so important for the euro, but the rate often rebounds from it. According to my forecast, I’m expecting some correctional movement to 1.0607 followed by growth up to the 112^thdegree at 1.0650. The Fibonacci ratio is located at 1.0640, calculated from a drop from 1.0714 to 1.0521.

As we can see, the 1.0640-1.0650 range is acting as a strong support, from which euro sales can restore. Keep an eye on US 10-year bonds, which are trading above the trend line. Eurobulls will be hoping for yields to fall below 2.4770%. If 10-year bonds rebound from the line, we can expect to see the euro correct to 1.0600.