- SWFX market sentiment is 55% bullish
- Trader pending orders are 60% to sell
- Pair opened Monday's session at 1.0513
- Upcoming Events:Spanish manufacturing; Bank holiday for the US
Friday. The Institute for Supply Management said its Chicago Purchasing Managers' Index fell to 54.6 points in the reported month after rising to 57.6 in November, while market analysts anticipated a slight deceleration to 56.5. However, any reading above the 50 point-level indicates expansion in business activity. Three of the five barometer components decreased between November and December, whereas employment held steady and supplier deliveries grew modestly. The worse than expected result was mainly driven by a slump in new orders, which fell 6.7 points to 56.5. Despite December's decrease, the Q4 reading reached its two-year high. About 50% of respondents said they expect the new administration to bring positive changes and benefit their businesses, whereas 40% noted that they expect no changes and 9% of respondents project a decline in business activity. As a result, the EUR/USD pair jumped from 1.0529 ahead of the release to 1.0544, while the GBP/USD advanced from 1.2357 to 1.2377.
Americans became more optimistic about the economy in December since the postelection bump in confidence continues. As data suggest the US consumer confidence reached its highest in more than 15 years during the previous week as Americans expect more strength ahead in business conditions, stock prices and the job market following the election of Donald Trump as president in November. According to the Conference Board the Consumer Confidence Index advanced to 113.7 in December from an upwardly revised 109.4 in November. Meanwhile, the data topped estimates in a Reuters poll for a reading of 109.0. Another reason for the gain in confidence is surging optimism among older Americans. Economists follow confidence indicators because upbeat consumers are more likely to increase personal spending, which makes up most of the US economy.
Fundamental releases: Spanish manufacturing
A single event drove the fundamental side of the EUR/USD market on Monday morning, but did not spill in a lot of volatility due to the medium impact nature of the announcement. Spanish manufacturing came out at 8:15 and posted a positive surprise reading and had little to no impact on the exchange rate.
EUR/USD to break pattern
Daily Chart: Following a volatile session on Friday, EUR/USD entered this year with a small green candle on the morning session, testing the upper boundary of the most recent channel down. We will look for the pattern to most likely break, as it has now completed its purpose of leading the pair towards the bottom trend-line of the most senior channel. A decent target for Monday could be 1.0550, with more risk at 1.0580 if a steeper surge is extended. With downside risk limited by 1.0513, it is unlikely that the pair posts losses on today's trading session.Daily chart
Hourly chart: The hourly chart shows EUR/USD retracing from the broken trend-line with a couple of broken trend-lines, and has currently re-entered the broken channel to test the 100-hour SMA at 1.0477. We expect the pair to now cut the losses and rebound to target 1.0508, the 55-hour SMA at first, followed by 1.0513 and 1.0515 after that. Alternatively, a deeper dive inside of the broken pattern would lead to tests of 1.0459, the 200-hour SMA. We do, however, still see a bullish outburst due to the broken pattern and senior channel pressures.
Hourly chart
Bullish sentiment persists
SWFX traders remain long on the pair, as 55% of open positions are long. Meanwhile, 60% of set up orders are to sell the Euro.
OANDA traders also remain bullish, as 55.51% of open EUR/USD positions were long on Monday. Meanwhile, SAXO bank traders entered negative territory, as 42.26% of open positions were long, compared to 52.77% before.