- 54% of pending orders are set to sell
- Open positions remain below 50% for longs
- Bulls to encounter resistance zone at 1.1080
- Short traders to try pushing the pair back below down-trend at 1.1040
- Economic events to watch in the next 24 hours: Euro zone Industrial Production (Jun), US Crude Oil Inventories (Aug 7) and Federal Budget Balance (Jul), Greek Parliament Debt Crisis Vote
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Investor morale in Europe's largest economy took another hit in August, despite the progress made in debt talks between Greece and its international creditors. The German ZEW Economic Sentiment Index fell to 25.0 points in August, from a recorded reading of 29.7 points the month before. Market participants, however, had expected a result of 31.9. Nonetheless, a result of above 0.0 indicates optimism for Germany's economic outlook during the next six months. Moreover, August was the fifth consecutive month, which saw surveyed investor and analyst confidence declining.
This slip in optimism can be attributed to geopolitical developments around the world and the minor slowdown in the German manufacturing sector in July. The German investor sentiment peaked at 54.8 in March of this year, however, since then the morale has steadily declined. Meanwhile, the current situation in Europe's growth engine improved marginally to 65.7 points from a reading of 63.9 in the seventh-month of the year.
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Upcoming fundamentals: Greek parliament to vote on bailout deal
Greek parliament will gather together on Wednesday, in order to have a vote on bailout proposals agreed between the country and its four creditor institutions – IMF, ECB, European Commission and the European Stability Mechanism. In case the vote approves conditions, other parliaments of the Euro zone countries will have enough time to vote the next week, before Greece is required to make a 3.2 billion euros' debt repayment to the ECB. Meanwhile, US federal budget data is due today at 18:00 GMT. Public finances have probably swung into deficit of $133.5 billion in July, down considerably from a $51.8 billion surplus registered in June.
Read More: Fundamental Analysis
EUR/USD rallies for sixth consecutive day
After substantial turbulence on Tuesday, the most traded currency pair continues gaining value in the morning on Wednesday as well. EUR/USD is intended to consolidate above the long-term downtrend. However, rally will encounter a strong supply area soon, which is located around 1.1080 (weekly R2; 100 and 55-day SMAs). Therefore, unless all mentioned levels are penetrated, our views towards this cross remain moderately pessimistic.Daily chart
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On the other hand, in the one-hour chart EUR/USD seems to be concentrating forces above the upper boundary of the downward channel created in the past two months. However, a confident confirmation of the trend-line is still necessary for two days in a row in order to change the short-term outlook to bullish one. Meanwhile, by trading above 200-hour SMA the pair's bullish chances are only increasing at the moment.
Hourly chart
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Read More: Technical Analysis
SWFX sentiment bearish, long pending orders lose ground
Meanwhile, bullish positions at OANDA account for just 34.67% at the moment, while SAXO Bank market participants are also remaining strongly pessimistic towards the common currency, as their share of longs takes up just 26% (-3%).
Spreads (avg,pip) / Trading volume / Volatility
Community members expect Euro to weaken by the end of the week
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Only a minority (27%) of participants in the weekly quiz expect the bullish movement for the EUR/USD currency pair. The median forecast for Friday of this week is located around the 1.08 mark.
Read More: Community Forecasts
A proponent of a near-term decline, Lukas, suggests that in the long-term "the EUR/USD pair could reach 0.9 level but it still hard to predict.". On the other hand, al_dcdemo is bullish on the Euro, as he thinks that EUR/USD "will remain at current levels at least until the end of the summer." Also, he supposes that "we will see a correction to 1.20 before any further decline."
Average forecast says EUR/USD will trade at 1.10 by November
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Jul 12 and Aug 12 expect, on average, to see the currency pair around 1.09 by the end of November. Though the majority of participants, namely 61% of them, believe the exchange rate will be strongly below 1.10 in ninety days, with 33% alone seeing it below 1.06. Alongside, 22% of those surveyed reckon the price will trade in the range between 1.10 and 1.16 by the end of November of this year. © Dukascopy Bank SA