FX.co ★ Analytical review of the EUR/USD currency pair with the forecast for Wednesday (Feb 03)

The European currency continued its strengthening against the US dollar on Tuesday on the back of the fears\' lowering regarding Greece and the lack of solid fundamental data from the Euro-zone and the USA.

At the Asian session the pair made a slight short – term correction downward, then the growth resumed with renewed vigour, whereby the pair returned to the level of the day\'s opening.

With the opening of the European trades, the upward movement was prolonged. The American trading session was also conducted in favor of the Euro. The day high was fixed near 1.3969. The low level appeared to be at 1.3882.

Totally, the Common European Currency increased by 36 points versus the greenback, the trading volatility amounted to 89 pips.

Fundamental review:

The German retail sales in December, 2009 increased by 0.8% from the decrease by -1.1% in November of the previous year. Despite the upsurge in sales in the retail trading, the analysts were expecting for stronger growth by 0.9%.

On an annualized basis, the retail sales index reduced by -2.5% which was entirely in line with experts expectations. For the whole 2009 the German retail sales dropped by 1.8%.

According to the results of the EU Eurostat the PPI in the Euro – zone in December, 2009 once again showed the upturn. I want to notice, that the increase of this indicator has been observing for the previous three consecutive months.

Following the statistics, the Euro — zone PPI, excluding the construction sector, went up by 0.1% in December, 2009, compared to November\'s readings and went down by 2.9% versus the meaning of December, 2008. In November, regarding the revised data, the prices came up by 0.2% from the previous month and reduced by 4.4%, compared to the same period of the previous year. Experts were looking for the index to remain unchanged from the last month.

The US data did not cause strong movements at the market.

Technical analysis:

During yesterday\'s trades the pair broke out the technical resistance level near 1.3934 which is necessary for the continuation of the upsurge, after that it tested the 100 day exponential moving average which currently is coming at 1.3955.

The trading is conducting between the 100 day exponential moving average and the 200 day exponential moving average which says us about a possible solid sideway motion with temporary falls or rises to one or another side.

The growth is restricted by the 38.2% correctional Fibo level also, in case of breaching it the pair again may decline to the 38th figure baseline.

Bollinger bands point to the continuation of the upward movement, but are gradually narrowing, as the trades volumes are reducing at the market.

MACD indicator is in the purchases zone and there is no divergence on this indicator.

Today\'s recommendations:

The support levels: 1.3934, 1.3884, 1.3847.

The resistance levels: 1.3906, 1.3946, 1.3987.

Today I recommend to buy the pair at 1 - hour timeframe closing above the level of 1.3927 with the target — T/P 1.4020 and S/L 1.3952.

Sell the pair at 1 - hour timeframe closing below the level of 1.3939 with the target — T/P 1.3895 and S/L 1.3959.

Best regards,

Analyst: M. Magdalinin.