EUR/USD analytical review with a forecast for March 25

The European currency fell on yesterday’s deals and hit 10-month lows against the US dollar, as investors were worried about the sovereign debt of Greece and Portugal. By the Asian deals opening, the pair was constantly decreasing, having broken out several key resistance levels. Only on the North-American session, the euro tried to recover for few times, however it led to one more wave of sale.

In the trading results, the pair declined by 176 points, the volatility was 198 points.

Fundamental analysis:

Two major things, which influenced on the EUR yesterday, should be mentioned.

First news is that Greece will be helped only by the IMF, which will provide package of measures in order to avoid a default in the country. I remind you that there are significant disagreements regarding these measures among the Eurozone leaders.

The second event is Fitch rating agency statement, which worsened the situation with the EUR even more, having lowered Portugal rating by one level and made a negative forecast for the Eurozone.

Concerning the Eurozone fundamental data, the main moments should be noted.

According Markit Economics, the French private sector activity fell to the lowest level for six months in March. The preliminary composite PMI declined to 55.2 points in March against 55.6 in February. A reading above 50 testifies to activity growth, a reading below 50 speaks for its reduction. The PMI for service sector tumbled to the lowest level for seven months in March and totaled to 53 versus 54.6 in February. For industry, this index increased to the highest level for 40 months and amounted to 56.3 in March against 54.9 in the previous month. Experts were expecting the industrial PMI to fall to 54.3 in March, and the service PMI to grow to 54.7.

The German preliminary composite PMI grew to 58.5 in March against 55.7 in February. Both industrial and service PMI increased. The German preliminary industrial PMI surged to 59.6 in March versus 57.2 in the preceding month. Economists were predicting 56.5 reading. The German preliminary service PMI was up to 54.7 in March versus 51.9 in February. Analysts were expecting growth to 52.

The Eurozone preliminary composite PMI climbed to 55.5 in March against 53.7 in February. Experts were forecasting swelling only to 53.5. In more detail, this index rose to 56.3 for Eurozone production sector in March against 54.2 in the previous months, while economists were waiting for growth only to 54. The Eurozone preliminary service PMI moved up to 53.7 in March versus 52 in February. Analysts were predicting the index to remain flat at the level of 52.

The consumer confidence in Italy decreased more than it was expected in March, which is related to lowering assess of the Italian consumers for personal finance. According to the reports, the consumer confidence index fell to 106.3 in March against 107.7 in the preceding month. Experts were awaiting the index reading at 107.3.

The German business sentiment index showed a growth in March. The index IFO increased to 98.1 against 95.2 in February. Analysts were expecting this index to rise only to 95.9.

As Eurostat said, new industrial orders in 16 countries of the Eurozone unexpectedly plunged by 2% in January compared to December and rose by 7% over year ago.

I remind you that in December the orders grew by 0.8% m-o-m and by 9.5% y-o-y, having demonstrated the most significant upsurge for 20 months. Economists were forecasting the orders to grow by 1.9% m-o-m and by 14.1% y-o-y.

The US durable goods orders continued steady recover in February. The orders for goods with a lifespan of not less than 3 years climbed by 0.5% to $178.12 billion. The defense goods orders dropped by 4.5%. Without consideration of defense goods, the durable goods orders showed a rise by 1.6% in February. In January the overall volume of goods orders was up by 3.9% (revised reading). Economists were waiting for the growth reading of 0.7%.

The US new home sales sharply declined in the month of February compared to January. According to the US Commerce Department, sales of single-family houses dropped by 2.2% to 308000 per year, having reached a new record high since 1963. Experts were forecasting increase by 1.9% to 315000.

Technical analysis:

The descendant movement was continuing all day yesterday. The trading is driven in the channel from March 22 with the low of 1.3302 and the high of 1.3567. The major key support level is 1.3296 area, after a breaking out of which, the movement can last to 1.3188. the level of 1.3373 acts as a resistance. In case of breakout of this level, the price can recover to 1.3458 area.

During yesterday’s trading, the pair managed to break through 61.8% Fibo correctional level, which speaks for maybe longer downward movement in middle-term outlook.

Bollinger bands point out the pair decline continuation, however, by today’s Asian deals, they are gradually converging because of liquidity lowering on the market. The trading is in the lower zone of the bands and 1.3333 acts as a dynamic resistance.

MACD is in the purchase area and any correctional movement can refresh the pair fall.

Today’s recommendations:

The support levels: 1.3296, 1.3188, 1.3049.
The resistance levels: 1.3373, 1.3458, 1.3536.

Today, buy the pair at 1-hour timeframe closing above the level of 1.3348 with the target — T/P 1.3445 and S/L 1.3309.
Sell the pair at 1-hour timeframe closing below the level of 1.3277 with the target – T/P 1.3180 and S/L 1.3328.


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