- SWFX market sentiment is 53% bearish
- Pending commands in the 100-pip range 62% long
- Pair opened Monday's session at the 1.1318 level
- Aggregate daily technical indicators bet EUR/USD will appreciate
- Economic events to watch over the next 24 hours: US Fed's Kashkari's Speech, BoJ Minutes
The final estimate of the single European region inflation in May showed that consumer prices plunged 0.1% on a yearly pace in May, having slowed its pace of decrease after April's steep drop of 0.2%. Meanwhile, this was the second consecutive decline in prices. From April to May period, the CPI, in turn, added at a pace of 0.4%, quicker than the 0.3% forecasted. The final data was in line with flash estimate released on May 31. The core CPI data was at an annualized growth rate of 0.8%, hire compared to the April reading of 0.7%. On a monthly pace, core CPI added 0.2% versus the 0% increase in April. In the meantime, the EU's statistics agency highlighted that restaurants, rents and tobacco prices push inflation higher while fuel, heating oil and gas, in contrast, had the negative impact. The negative interest rate within the Euro zone region has failed to preserve hopes of inflation, despite President Mario Draghi statements that he and other senior bank officials are convinced that the measures are working. It is worth to point out, that inflation has remained in negative territory during the first half of 2015, but after rising in the second half of the year, it has weakened again in 2016.
As reported by the US Census Bureau, there were 1.164 million constructions of residential buildings started in the US in May. The data beat expectations of 1.15 million, while still being below the April's reading of 1.172 million. During the previous month there was a sharp increase in the construction, but a lot of homes on the market became less affordable, amid a rather sharp increase in prices for those homes. Mortgage rates, however, are at low levels, somewhat boosting demand for apartment and house acquisitions, but, nonetheless, for some prices remain too high. Single-family houses have a higher impact than apartments, as they provide a larger economic boost and they rose 0.3% up to 764,000, while apartments showed only 396,000 residences, thus, barely changed compared to the previous month's data. Furthermore, only 1.138 million building permits for construction were issued in the US last month, with the data slightly failing to meat expectations of 1.15 million. Among permits the single-family ones provided concerns, as they showed the largest monthly slowdown during the past 15 months. The permits for houses dropped 2% down to 726,000 units, while the apartment permits were at 381,000 units. This weaker data is unlikely to have a serious effect on the GDP second estimate, as it is forecasted to show signs of improvement, being driven by higher demand in household.
Upcoming fundamentals: Kashkari Speaks and Bank of Japan Minutes
At the start of a new week, financial markets are quiet, as the only events affecting the fundamental data on Monday are Fed's Kashkari's Speech and Bank of Japan's Minutes. Firstly, at 16:15 GMT the Minneapolis Federal Reserve Bank President and a non-voting member of the Federal Open Market Committee Neel Kashkari will give a speech on shortfalls of current policies towards banks. Secondly, the Bank of Japan is set to release its monetary policy meeting minutes at 23:50 GMT, which will provide detailed record of the BoJ policy board's meeting.
EUR/USD surges to 1.1378 on Monday
Daily chart: The European currency scored gains against the US Dollar on Friday, as it moved from the level of 1.1232 to 1.1273 at the end of day's trading session. However, a much bigger surprise is the Monday's morning, as after the weekend, the currency pair has started the day's trading with an increase in value to 1.1329. In addition, since the start of the session, the currency exchange rate has gained even more and at the moment is at 1.1376. The Euro now face a new weekly R2 at 1.1408 against the US Dollar on Monday.Daily chart
Hourly chart: On the hourly chart it can be seen that the Euro by starting the Monday session at 1.1317, which is a lot higher than previous close on Friday, passed the monthly pivot point at 1.1282 and the 200-hour SMA at 1.1286 against the US Dollar. In addition, on Monday morning the currency exchange rate reached and broke the newly formed first weekly resistance at 1.1340. The pair also shifted the upper Bollinger band, which was part of the resistance cluster together with the monthly PP and 200-hour SMA. At the moment, the upper Bollinger band has moved to the 1.1408 level, which is exactly where the weekly R2 is located.
Hourly chart
SWFX trader bearish sentiment unchanged on Monday
OANDA trader bearish sentiment has increased compared to Friday, as 58.99% of open positions are short. In addition, SAXO Bank clients have increased their bearish stance, as their open short positions are now at 62.10% compared to 60.38% on Friday.