Euro needs correction for new wave of growth
Weak data on consumer confidence in the euro area led to a further decline in the euro yesterday afternoon. Despite this, a small downward correction in risky assets, which is observed today at the beginning of the trading day, does not threaten the upward trend that was formed at the end of last week.
Data on the index of national activity in the US from the Federal Reserve Bank of Chicago helped the US dollar resume its growth.
According to the report, the national activity index in June 2018 was 0.43 points against -0.45 points in May. The May data was revised upward from -0.15. Growth was associated with an increase in production indicators. In all, 45 indicators showed growth, while the remaining 40 indicators decreased. The moving average index for three months in June rose to +0.16.
Limited ascending short-term potential of the US dollar was weak data on sales in the secondary housing market of the US.
According to the report, rising prices and a limited supply of homes led to a drop in sales in the summer. The report of the National Association of Realtors showed that sales in the secondary housing market in June decreased by 0.6% compared to the previous month and amounted to 5.38 million homes per year. Economists had expected that sales in June will grow to 5.45 million homes a year. In comparison with the same period of the previous year, sales in June fell by 2.2%.
As noted above, weak data on consumer confidence in the euro area put pressure on the euro. According to the report, the preliminary index of consumer confidence in the eurozone for July 2018 remained at a negative level of -0.6. The main pressure on the index has political problems and disagreements between the US and the EU on trade relations.
Yesterday, it also became known that the EU negotiator Michel Barnier rejected the last UK proposal on Brexit. This is indicated in the message of the Financial Times. It is important to note that the proposal of the British side was to keep the UK free access to the financial market of the EU after leaving the political bloc.
As for the technical picture of the EURUSD pair, the pressure on the euro will continue. However, this will benefit the buyers of risky assets, as it will create the lower border of the new uplink. Support for the 1.1660 area may be intermediate, but a larger level of 1.1640 will be a good area for opening new long positions in euros, in anticipation of continued growth.