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The economic data published this week did not have a single, clear impact on the forex market. Some of the reports turned out to be better than forecast, while others were weaker. An example of it was a U.S. market Real Estate where on the one hand decreased the number of ongoing construction was 558K compare to expected 580K. On the other hand, the number of permits issued for construction was 653K compared to the expected 590K. Similar story was in PMI index in euro zone. For the manufacturing sector amounted to 52 points with expectations at 51.8 points, while the service sector amounted to 52.3 points, but was expected to 53.9 points.
In addition, the U.S. index data from Philadelphia droped harder than expected to the level of 15.2 points, but apart from that it appeared that long-term capital inflows into the U.S. rose up to 126.8 billion dollars, instead of 30 billion.
Other data from the Euro Zone was also mixed. At the beginning of the week it appeared that the ZEW index recorded a larger decline and recorded 47.2 points to expected 49.5 points,on Friday the dynamics of industrial orders, which unexpectedly was -1.5% y / y, compared to expected -6.5%.
In the early days of course the main currency pair behave be as calm, but the vast majority of the week, the U.S. currency gained in value. At some point, rate pierced significant level of support at 1.42, which only accelerated downward movement. Finally we noted low around the 1.4030 level, but at the end of the session Friday EUR / USD was trading around 1.4160.
According to our forecast of EUR / USD, last week we saw the bottom wedge (signal for the new drop), which has been built from 22 December. On Thursday, EUR/USD did set a new low of 1.4029. It is pretty obvious that the current downward movement took over 40% of last year's wave of growth. In addition we can see five wave movement which suggests that after the upward adjustment we should see another dip in EUR/USD to the new lows. Therefore, in the medium term (several months) is more likely to further strengthen the dollar.
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