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As soon as the results of the Bank of England meeting were announced, the pound rushed up, eventually rising by 200 points. The growth was so strong that it pushed the euro to rise. And it’s not about raising the refinancing rate from 1.00% to 1.25%. And that three of the nine board members were in favor of a 0.50% increase. The commentary to the meeting, published by the British central bank, speaks in plain text about the possibility of accelerating the pace of monetary tightening from the next board meeting. That is, in a month and a half, the refinancing rate may reach 1.75%. Which is well above expectations. In addition, the BoE intends to continue to raise interest rates. And just as important, unlike the Federal Reserve, the British central bank does not place all the blame for rising prices on Russia and China. In general, the BoE quite clearly outlined its next steps, which was the reason for the growth of optimism regarding the British currency.
After such a sharp jump, a small rollback immediately occurred, which is quite logical. But today, the euro may continue to grow and return to the level of 1.0600. The reason will be data on industrial production in the United States, the growth rate of which should slow down from 6.4% to 4.9%. This is a rather sharp slowdown, which will naturally have a negative impact on the dollar.
Industrial production (United States):
The EURUSD currency pair, after a short stagnation at the base of the downward trend, has moved into the correction stage. This movement led to the strengthening of the euro by about 200 points.
The RSI technical instrument turned out to be in the overbought zone in the short-term periods at the time of the upward momentum. This was a signal that long positions were overheating. RSI H4 is moving in the upper area of the 50/70 indicator, which indicates a corrective move. RSI D1 is at the bottom of the 30/50 indicator, which signals a downtrend.
The moving MA lines on Alligator H4 have changed direction from a downward to an upward cycle, this movement indicates a corrective move in the price. Alligator D1 is still in a downward trend cycle, there is no intertwining between the MA lines.
Expectations and prospects
Based on the signal about overheating of long positions, the correction cycle slowed down the formation. The 1.0636 level serves as resistance, where the quote recently approached. At the moment, a phased restoration of dollar positions is being considered. The main signal about the growth of short positions in the euro will appear after keeping the price below the level of 1.0500 for a substantial amount of time.
Complex indicator analysis has a sell signal in the short term, due to the slowdown in the corrective move. Indicators in the intraday period have a residual signal to buy due to the correction. Indicators in the medium term are still focused on the main downward trend.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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