The need for correction is not just long overdue, but has even already begun last Friday. However, the process is extremely slow. Nevertheless, there is no doubt that this is a corrective movement. The uncertainty of the single European currency is caused by business activity indices. The fact is that the preliminary assessment should show a decrease in all indices without exception. For example, the production index should fall from 62.8 points to 62.2 points. The index of business activity in the service sector may fall from 59.8 points to 59.4 points. So, the composite index should decrease from 60.2 points to 59.8 points. Thus, even a slight decline in the single European currency is quite possible during the European session. It will be small for the simple reason that the single European currency is already seriously oversold, which means that its downward movement is extremely limited.
Composite PMI (Europe):
However, this does not mean that the correction is postponed indefinitely. American statistics are much more important, and it is precisely with these data that things will be much worse today than in the eurozone. And we are talking about the same preliminary estimates of business activity indices. Thus, the manufacturing index may decrease from 63.4 points to 63.0 points, while the index of business activity in the service sector from 59.9 points to 59.0 points. As a result of all this, the composite index should decrease from 59.9 points to 59.0 points. And due to the fact that American statistics have much more weight, the market will react to it noticeably more actively. Plus, the dollar is clearly overbought. This will be the final reason for the correction.
Composite index of business activity (USA):
After updating the local minimum of 2021, the EUR/USD pair slowed down its downward course. As a result, there was a corrective movement, which led to the return of the quote above the previously passed level of 1.1700.
The RSI technical indicator confirms the correction move by crossing the 50 level from the bottom up.
The daily trading chart shows a downward cycle from the beginning of June, the scale of which leads to a change of trading interests.
Expectations and prospects:
The corrective move returned the quote in the area of the Fibonacci line 23.6-1.1720, where the possibility of completing the existing movement is being considered. If there is no reduction in the volume of long positions in the area of this level, then the subsequent Fibo level is located around the 1.1760 mark.
A comprehensive indicator analysis gives a buy signal based on the short-term period. At the same time, the intraday and medium-term periods signal a sale.
The material has been provided by InstaForex Company - www.instaforex.com