Baxia Markets News

Navigating EURUSD: A Sharp Retracement Unfolds

Written by Baxia Markets | Dec 19, 2023 8:15:00 AM

In the intricate dance of forex, EURUSD has recently executed a notable retreat, marking a sharp retracement after experiencing a robust three-day bullish rally from December 11th to December 14th, 2023. Over the last two days, the pair's price has witnessed a decline of approximately 1%, plummeting from 1.1009 to 1.0888. Importantly, it has managed to maintain its position above the key support level at 1.0880, preserving the integrity of the prevailing bullish trend.

As today unfolds, the currency pair finds itself at a crossroads, with key economic indicators poised to influence its trajectory. The European Union's Consumer Price Index (CPI) takes center stage, with economists forecasting a slowdown to 2.4% from the previous 2.9%. An actual data point surpassing expectations may fuel a bullish continuation, propelling EURUSD upward. Conversely, a figure below the forecast could potentially breach the key support level, escalating bearish pressure on the pair.

 

Simultaneously, attention is drawn to the United States with the release of Building Permits data. Forecasts anticipate a deceleration in permit issuance. Should the actual data come in lower than expected, it might signal a stronger Euro against the US Dollar. Conversely, a higher-than-expected reading could exert downward pressure on EURUSD.

 

A glance at the Exponential Moving Averages (EMA) 50 & 200 reveals a bullish landscape, with the EMA 50 consistently positioned above the EMA 200. Despite the recent 1% dip prompting a convergence of the EMAs, the subsequent divergence signifies a resurgence in bullish momentum.

 

Turning to oscillator indicators, the Relative Strength Index (RSI) has displayed a bearish inclination by breaking below the 40% level and steadfastly remaining beneath 60%. However, a potential break above 60% could herald a bullish reversal. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram and signal line have recently crossed the 0 level, aligning with a bullish trend. The mixed signals suggest that EURUSD is in the midst of a bullish correction, presenting an opportune moment for accumulation before a potential surge to new highs.

 

In conclusion, the dynamic realm of EURUSD, the sharp retracement and forthcoming economic releases have set the stage for a critical juncture. The currency pair's ability to hold above the key support level at 1.0880 signifies resilience in the prevailing bullish trend. As traders navigate through the intricacies of technical indicators and monitor key economic data, the future trajectory of EURUSD remains uncertain. The mixed signals, including the recent divergence in EMAs and oscillators, suggest a delicate balance between potential bullish continuation and a more pronounced correction. Traders are advised to exercise caution and vigilance, as the interplay of market forces unfolds in this nuanced scenario.

Key Economic Releases to Watch Today

EUR, CPI (YoY) (Nov)
Forecast 2.4% vs Previous 2.9%

USD, Building Permits (Nov)
Forecast 1.470M vs Previous 1.498M

CAD, CPI (MoM) (Nov)
Forecast -0.2 vs Previous 0.1%

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