EUR/USD: decline will continue
On Thursday the currency pair EUR/USD traded with high volatility. Following the release of poor data on GDP in Eurozone, the price fell to the level of 1.3647. However, in the afternoon the pair has almost regained losses, returning to the level of 1.3715 (middle line of Bollinger bands), after the release of negative data on the US industrial production.
Recall that preliminary GDP for Q1 in Europe has disappointed investors. The index has risen by 0.2% against expectations of 0.4%. US industrial production fell by 0.6% in April. Additional pressure on the USD was caused the rise in inflation up to the target of 2.0%.
Attention today shall be focused on the number of new houses construction in the USA. It is expected that this figure will rise up to 0.98 million. Housing market is traditionally very important for the American economy; therefore it makes sense to assume that the USD will strengthen.
Support and resistance
The nearest resistance level for the pair is 1.3665 (bottom line of Bollinger bands indicator). If this level is broken down, the price can go further down to the levels of 1.3640 and 1.3600. However, correction from the level of 1.3665 up to the level of 1.3715 (middle line of Bollinger bands) is not ruled out.
Technical indicators confirm probability of downward movement. MACD histogram is in the negative zone; its volumes are not increasing any more. Stochastic lines are crossing and turning down, forming a sell signal.
It is advisable to open short positions at the current price level with the target of 1.3640. Pending buy orders with the target of 1.3715 are recommended at the level of 1.3665.
Analyst of LiteForex Investments Limited