- SWFX market sentiment is neutral
- Trader pending orders are 56% to sell
- Pair opened Wednesday's session at the 1.1054 level
- Aggregate daily technical indicators bet EUR/USD will fall
- Economic events to watch over the next 24 hours: EU PMIs; US ADP Non-Farm Employment Change; FOMC Statement and Federal Funds Rate
US manufacturing activity grew for the second consecutive month in October, official data showed on Tuesday. The Institute for Supply Management said its Manufacturing Purchasing Managers' Index jumped to 51.9 points in October, following the preceding month's reading of 51.5 and surpassing the 51.8 market forecast. The October growth was mainly driven by a rise in production and hiring. Any reading above the 50 point level 50 indicates an expansion in the manufacturing sector, which accounts for about 12% of the US economy. Meanwhile, the Production Index rose 1.8% to 54.6 points, while the New Orders Index dropped to 52.1 from the previous month's 55.1 and the Employment Index increased 3.2% to 52.9 during the reported period. The Export Orders Index rose slightly to 52.5 from the prior month's figure of 52. Analysts widely expect manufacturing activity to pick up in the Q4. The US manufacturing sector was hit by the strong US Dollar between June 2014 and December 2015, as the appreciation of the Greenback hampered US exports. The Federal Reserve began a two-day policy meeting on Tuesday and it is unlikely to raise interest rates at this meeting ahead of the presidential election on November 8. However, analysts widely anticipate a December rate hike.
The single European area economy grew at the same slow pace in the third quarter as the second while core inflation, in turn, dipped in October, reinforcing expectations that the European Central Bank will negotiate to extend its asset-buying program in December. Meanwhile, Euro-zone's preliminary gross domestic product growth increased a seasonally adjusted 0.3% in the third quarter. The following data was in line with forecasts and unchanged from Q2. Consumer prices, in turn, advanced 0.5% year-on-year in October, picking up from 0.4% in September and 0.2% in August as the drag on the index from energy diminished. In the meantime, energy prices were only 0.9% lower in October than 12 months earlier, compared to 3.0% down in September. However, excluding the most volatile prices for unprocessed food and energy, inflation was just 0.7% on a yearly basis, down from 0.8% in the previous five months. The figure is the one the ECB uses as core inflation. Eventually, the ECB is going to meet in December and will have to decide whether it extends its bond-buying beyond an initial target date in March.
Upcoming fundamentals: US employment and the FED
During Wednesday's trading session there will be some minor releases, as the European countries are all publishing their Manufacturing PMI data from 8:15 to 9:00 GMT. However, most likely the data will not affect the markets. It is a 100% certainty that the data coming from the US during today's trading session will affect the strength of the US Dollar, which will affect most financial prices. First of all at 12:15 GMT the ADP Non-Farm Employment Change will be published. However, that is a minor event if compared with what will occur later in the day. At 18:00 GMT the FOMC Statement and the Federal Funds Rate will be announced.
EUR/USD continues to gain on Wednesday
Daily chart: The common European currency appreciated against the US Dollar on Wednesday morning, as it was set to attempt to break the resistance put up by the weekly R2 at 1.1082. Previously, on Tuesday the pair jumped 75 pips or 0.69%. During the surge the rate also broke past three resistance levels, which combined comprise a cluster that now is providing support to the currency exchange rate. The cluster consists of the weekly R1 at 1.1032, monthly PP at 1.1025 and the 20-day SMA at 1.1014.Daily chart
Hourly chart: The hourly chart for the EUR/USD exchange rate shows a mighty surge. It looks like the only resistance, which slowed down the surge of the Euro for just one hour was the first weekly resistance at 1.1032. On the other hand the rate is set to face the second weekly resistance at 1.1082 very soon, which might also hinder the surge. However, after the weekly R2, the road is free up to the September low levels of 1.1149.
Hourly chart
Traders are neutral
Traders are neutral on the pair, as 50% of open positions are long and short. Meanwhile, trader set up orders are bearish, as 56% of pending commands are to sell.
OANDA traders dropped their bullish sentiment and no longer have an idea what will happened, as the trader sentiment is neutral with 50.71% of open EUR/USD positions being long. Meanwhile, SAXO Bank clients increased their bearishness, as open short positions now add up to 66.70%, compared to 57.89% short positions during the previous trading session.