A stable correction remains elusive, even though it's becoming increasingly difficult for the dollar to continue rising. In spite of US industrial production expanding by 0.4% in August after advancing by 0.7% in July, the currency did not strengthen. On the contrary, it edged down despite the data being significantly better than expected. The pace of decline was expected to accelerate from -0.2% to -0.5%. So not only did we get growth instead of a decline, but the previous data was also revised in a more positive direction. Logically, the dollar should have strengthened somewhat. However, its excessive overbought condition prevented that from happening. The extremely positive nature of the economic report prevented a symbolic retracement.
Furthermore, what happened on Friday suggests that the market is in need of a correction. This could happen today since the economic calendar is completely empty. The recent macro data had prevented the correction. Moreover, the market still needs to prepare for the upcoming meeting of the Federal Open Market Committee. Considering that the Federal Reserve is expected to have a much more hawkish tone than the European Central Bank, approaching this event with an overbought dollar would be quite reckless. After all, a stricter monetary policy will contribute to the dollar's strength.
During a minor correction, EURUSD returned to the area of the previously broken support at 1.0650/1.0680. This move may indicate several technical factors, such as a realignment of trading forces due to overheated short positions in the euro and a breakout-pullback pattern that is characteristic after breaking important levels.
On the four-hour chart, the RSI technical indicator reached the oversold territory, which triggered the correction.
On the same time frame, the Alligator's MAs are headed downwards, corresponding to the direction of the price.
Outlook
Staying below the 1.0650 level would increase the chances of further decline. However, at this stage, the euro is still oversold in the market, which could lead to a prolonged price retracement and consolidation.
The complex indicator analysis unveiled that in the short-term and intraday periods, indicators suggest a retracement stage.The material has been provided by InstaForex Company - www.instaforex.com
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