Yesterday’s Trading:
The euro/dollar experienced sharp fluctuations in a range of 150 points on Monday. In the first half of the day, the euro strengthened against the USD to 1.0945 following the publication of business activity data for Germany and the Eurozone. Business activity in December was up.
Inflation in Germany was down, increasing the likelihood of an extension of economic stimulus measures from the ECB. Preliminary German CPI data for December stood at -0.1% MoM, 0.3% YoY (forecasted: 0.2% MoM, 0.6% YoY, previous: 0.1% MoM, 0.4% YoY).
The EUR/USD dropped to 1.0780 at the US session. The euro bulls couldn’t manage to restore their losses after weak US data. The US ISM business activity index fell from 48.6 to 48.2. The Markit version of the indicator fell from 52.8 to 51.2.
Main news of the day (EET):
Market Expectations:
Investor attention on Tuesday will be on German, UK, New Zealand and Eurozone data. The weekly and daily technical pictures are indicating a further fall for the euro against the US dollar and UK pound.
Technical Analysis:
The euro/dollar has started the new year with fluctuations in all directions. The fall halted at the D3 line (lower limit of MA channel) and the support takes its beginnings from 4th December, 2015. The graphs on the old time frames indicate a fall for the euro. The D3 will be a support.
To define the nearest target for the week, we need to make a channel. Let’s put the 1.1059 and 1.0984 peaks (15th and 28th December) together and stick a parallel line at 1.0802 (17th December minimum). According to the channel at the lower limit, the closest target is 1.0700. My target for Tuesday is 1.0781.
