Even though the Eurozone manufacturing PMI turned out to be lower than the preliminary estimate, the euro continued its upward correction. Initially, business activity in the manufacturing sector was projected to rise to 59.0 from 58.0, but the actual reading came in at 58.7.
The market has already priced in this scenario. In the meantime, the employment report far exceeded the forecast. At first, analysts expected the unemployment rate to stay unchanged. Then, the estimate was revised upwards to 7.1% from 7.2%. Finally, it became clear that the unemployment rate declined to 7.0%. Right after the report was released, the euro moved to the upside.
Traders downplayed the data from the US, although it exceeded the forecast. Thus, business activity in the US manufacturing sector decreased to 55.5 from 57.7 while analysts predicted a drop to 55.0.
In addition, the number of new job openings was estimated to fall to 10.520 million from 10.562 million, but instead, it rose to 10.925 million from 10.775 million. The previous data was upwardly revised. In other words, there is still a high potential for employment growth.
On Wednesday, the single European currency may continue to strengthen. This time, it may be supported by the data on inflation which is expected to slow down to 4.4% from 5.0%. If so, Europe will become the first region to boast a decline in inflation which has become a global challenge. This scenario will spark an interest in the euro.
In the course of a correction, the EUR/USD pair approached the resistance area of 1.1270/1.1300, where traders reduced the volume of long positions. As a result, the upward movement slowed down, but the correction continued. The RSI indicator is held in the upper zone of 50/70 on the H4 time frame, thus confirming the corrective movement.
In the meantime, the moving averages of the Alligator indicator reversed to the upside on the 4-hour chart. This is another confirmation of a correction. On the other hand, the indicator on D1 is still signaling a downward scenario. So, there is a downtrend on the daily chart, which includes a corrective cycle.
Forecast
Despite the resistance zone, the corrective movement is still relevant in the market. So, the pair quote is likely to stay within the range of 1.1270/1.1320 and retreat from the resistance zone for a while. If the price holds above the level of 1.1330 on H4, this will serve as a signal for a further uptrend.
If the quote settles below 1.1230 on H4, this will indicate the end of the correction. Comprehensive indicator analysis generates a buy signal on the short-term and intraday time frames due to the ongoing correction. In the medium and long term, indicators form a sell signal as part of a downtrend.
