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16.05.202310:44 Forex Analysis & Reviews: Trading plan for EUR/USD and GBP/USD on May 16

Dollar is obviously overbought, so it is not a surprise that it declined on Monday as soon as the Asian session started. However, the correction stopped when the Euro area reported that the 2.0% growth in its industrial sector was replaced by a 1.4% decline. The forecast was only a slowdown to 1.1%.

Industrial production (Europe):

Exchange Rates 16.05.2023 analysis

The situation with the overbought dollar was aggravated by the labor market data published this morning in the UK. According to the report, the unemployment rate rose from 3.8% to 3.9%. Pound immediately went down, while euro stopped rising.

Unemployment rate (UK):

Exchange Rates 16.05.2023 analysis

Most likely, the market will remain still during the European trading session, especially since the second estimate for the eurozone's 1st quarter GDP is coming. US statistics could be a reason for dollar to weaken, but that will happen only if retail sales growth slows from 2.9% to 1.4%. Industrial production growth decreasing from 0.5% to 0.3% will be a sign that the US is approaching recession.

Retail sales (US):

Exchange Rates 16.05.2023 analysis

EUR/USD slowing around 1.0850 triggered a rebound, but did not lead to significant changes. The market is still bearish, so a correction could still happen. However, everything will change if the pair returns above the level of 1.0900.

Exchange Rates 16.05.2023 analysis

A similar scenario is seen in GBP/USD. The level of 1.2450 serves as a support on the way of a correction, in relation to which there was a reversal. To see growth, the pair has to stay above the level of 1.2250. Until then, the risk of further decline persists.

*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.

Mark Bom,
Analytical expert of InstaSpot
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