- SWFX market sentiment is 56% bearish
- 54% of pending orders in 100-pip range are set to SELL
- 58% of traders remain bullish on the Dollar
- Upcoming Events: Mario Draghi speech, FOMC Members Dudley, Evans and Kashkari speak
A victory of the Angela Merkel's party in German Parliamentary elections expectedly led to appreciation of the Euro against the American Dollar. However, the further surge to the top is unlikely, as the pair faces very strong resistance on its way. On the other hand, there is a need to take into account a possible effect from Draghi testimony before the European Parliament that will happen today at 13:00 GMT.
Stronger-than-expected economic reports for the Euro zone put the EUR/USD currency pair in the 1.1995 area for a while. The Euro rose against the Greenback by 19 base points or 0.16%, though an increase was offset by bearish reaction on the FOMC member's speech.
Markit preliminary report showed on Friday that the composite PMI registered the strongest gain in six years, as the index rose to the 56.7 in the month of September, up from 55.7 points seen in August. Then, the Euro held steady, while Mr. Draghi avoided commenting any policy-sensitive issues during his speech. From the US side, the FOMC Member John Williams said that he expected the Fed to raise rates gradually depending on the US economic performance.
Third Draghi speech in a row
Today will be another important event for the Euro traders. At 13:00 GMT the ECB President Mario Draghi will start to testify about the economy and monetary policy before the European Parliament. It is hard to estimate how closely traders would watch his third public speech in a row, but an affect from it is still expected to be greater that from FOMC Members who will also make certain remains through the day.
EUR/USD heads upwards after Merkel wins
Although initially markets were positively anticipating the upcoming Draghi speech at Trinity College, but the subsequent reaction led to quite rapid recovery of the Dollar on Friday. To certain extent, such bearish movement could be related to anticipation of the German Parliamentary elections. However, as soon as it became clear that Merkel managed to retain her post, the Euro started restoring previously lost positions.
From technical perspective, this upside momentum is likely to be neutralized by a combined resistance formed by the 55-, 100- and 200-hour SMAs together with the weekly PP at 1.1947. On the other hand, Draghi's testimony at the European Parliament might create a new short-term volatility in the markets, which could give the pair a necessary impulse to bypass those barriers. In the opposite case, the rate is likely to fall to the bottom edge of a dominant ascending channel.
Hourly Chart
In result of the various fundamental events that happened during the previous week, the currency pair has formed a symmetrical triangle whose upper boundary represents a part of a junior descending channel and the lower boundary represents a part of a senior ascending channel. Accordingly, in the end of this or beginning of the next week the pair is expected to make a breakout from this pattern. This result will reveal what trend has prevailed and in which direction the currency rate would move in the nearest perspective.
Daily Chart
Traders remain bearish on the pair
The bearish market sentiment continues to dominate the market, as 56% of open positions are short. In the meantime, the outlook for the two currencies against the rest of the traded financial instruments is as follows. Euro is 61% bearish, while for the Dollar 58% bullish.
Traders of OANDA remain bearish, as 67% of open positions are short. Meanwhile, SAXO are also bearish on this currency pair with 61% of open short positions.
Spreads (avg, pip) / Trading volume / Volatility