Despite the fact that industrial production fell by 2.2% in the euro area, while in the previous month it grew by 0.2%, the euro still rose for another day. And this raises many questions since the euro did not have any reason to rise on Thursday.
t was actually the opposite. Apparently, this is not just due to momentum or speculation. It seems that the latest US inflation report convinced many investors of the possibility that the interest rate level of the European Central Bank will be higher in the near future than that of the Federal Reserve. So there is a kind of global reassessment of positions. It doesn't make any sense to discuss the realistic possibility of such a scenario.
All answers will be given after the upcoming meetings of both central banks. For now we can take note of the fact that the dollar is extremely oversold. Therefore, a rebound is simply inevitable. The question is when exactly that will happen.
Clearly, economic data failed to do the job. Although it may be because it hasn't been long since the US inflation report was published. Maybe the market simply ignored yesterday's data. Today, the macroeconomic calendar is absolutely empty, and this is quite suitable for a rebound. But do not forget about the trend, which may persist and continue to push the euro upwards. Moreover, if the reassessment of expectations regarding the disparity of interest rates really is the main driving force, then there's a high degree of probability that we will see an extension of the euro's uptrend.
The EUR/USD pair strengthened in value almost by 300 points since the beginning of the trading week. Such an intense price change over a short period of time indicates that the euro is extremely overbought.
On the four-hour chart, the RSI shows a strong signal of the euro's overbought conditions. The indicator moves at the values of 2017, which points to aggressive long positions.
On the same time frame, the Alligator's MAs are headed upwards, which corresponds to an uptrend.
Outlook In this situation, a pullback would be the next logical step, however, speculative frenzy could well ignore signals from technical analysis.
In this case, this will fuel the momentum of the uptrend, adding to the euro's overbought conditions. The complex indicator analysis unveiled that in the short-term, medium-term and intraday periods, indicators are pointing to an uptrend.
