EUR/USD confirms support at 1.14

Source: Dukascopy Bank SA
Pending orders held by bulls surged 13 percentage points to reach 55%
  • Long open positions have in turn declined from 49% to 42%
  • Bullish near term target is placed at Aug 26/27 highs of 1.1560/80
  • Short traders are looking at the 1.13 support area
  • Economic events to watch in the next 24 hours: Jackson Hole Symposium (Day 1); German Import Price Index (Jul); French Business Climate (Aug); Spanish Revised GDP (Q2); Euro zone M3 Money Supply (Jul); US Unemployment Claims (Aug 22), Prelim GDP (Q2), Personal Consumption (Q2) and Pending Home Sales (Jul)

  • © Dukascopy Bank SA
    Euro was trading mainly downwards against other majors on Wednesday, as volatility in equity market decreased and the common currency dropped its unusual safe-haven status during the turmoil. Australian and Canadian dollars jumped the most by 2.1-2.2% versus the Euro as oil prices managed to pare some of losses. In addition, EUR/USD slumped by 1.9% yesterday. This currency pair was hurt by stronger-than-forecasted US durable goods orders, and even the New York Fed President William Dudley's dovish interest rate comments failed to reverse the Greenback's positive trend.

    German business morale improved more than expected in August as companies remained confident the Euro zone's number one economy is resilient enough to withstand China's slowdown. The Ifo institute's business climate index inched higher to 108.3 this month, up from 108 in July and overshooting the median estimate for a decrease to 107.6. In its August monthly bulletin the Bundesbank said that Germany is set for "solid" growth in the remainder of the year. Robust domestic spending, supported by record-low unemployment and borrowing costs, could provide a shield against weakness in China, German third-biggest trading partner. The Ifo's Current Assessment sub-survey, indicating current conditions in the German economy, booked 114.8 points, compared with the previous month's figure of 113.9. At the same time, the Expectations Index, reflecting companies' projections for the next six months, slid to 102.2, from 102.3.

    The Euro zone's biggest economy grew 0.4% in the second quarter, following the 0.3% expansion in the three months through March. The annual gauge on a non-seasonally adjusted basis showed 1.6% growth, after the first quarter saw a revised 1.2% gain. German overseas sales increased 2.2% in the three months through June, while private consumption gained 0.2%, and capital investment contracted 0.4%.

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    Upcoming fundamentals: EU and US valuable data expected on Thursday



    Both the Euro zone and US are going to publish a lot of important statistics today. The French business sentiment indicator is due at 6:45 GMT, while markets are following an important business conference taking place in France and is organised by the Movement of Enterprises of France. Following that, the Spanish second-quarter GDP (7:00 GMT) is estimated to be revised upwards from 2.7% to 3.1% on an annual basis. From another side of the Atlantic, US GDP is likely to be revised to the upside as well, as the second-estimate average projections suggest growth will be upgraded from 2.3% to 3.2%. In addition, markets will be closely watching US pending home sales at 14:00 GMT and personal spending numbers at 12:30 GMT, while world's financial experts and central bank chiefs are heading to Jackson Hole Symposium in Wyoming, US.


    EUR/USD confirms support at 1.14

    As expected, the EUR/USD cross breached an important support line that was targeted by bears yesterday. Therefore, many crucial technical levels were violated, which increases the risk of a further sell off in the short term. Bears are likely to aim at yesterday's low of 1.1291. However, this level is reinforced by the 23.6% Fibonacci retracement of a 2014-2015 long term downtrend. On the contrary, bulls are still hoping for a recovery with daily indicators pointing upwards, but any rally should be capped by recent highs around 1.1560/80.

    Daily chart
    © Dukascopy Bank SA

    In the one-hour chart EUR/USD has just neared the lower boundary of the channel up pattern, which is strengthened both by 23.6% retracement and 200-hour SMA at 1.1295/68. Therefore, there is a possibility a recovery will occur as soon as today, while bullish targets remain the same as mentioned earlier at 1.1560/80 (Aug 26-27 highs).

    Hourly chart
    © Dukascopy Bank SA

    SWFX sentiment deteriorates, while pending orders climb

    Sentiment towards EUR/USD among SWFX market participants dipped considerably in the past 24 hours, as only 42% of all open positions are positive at the moment, down from 49% yesterday morning. Despite that, the portion of long pending orders in 100-pip range from the spot price surged from 42% to 55% amid a recent decline of the pair.

    The share of bullish positions at OANDA is 42.50% (+6%) at the moment, while SAXO Bank market participants are also remaining strongly pessimistic towards the common currency, with their portion of longs taking up only 37% of all open trades on Thursday.













    Spreads (avg,pip) / Trading volume / Volatility




    Community members expect Euro to continue rallying this week

    © Dukascopy Bank SA

    As volatility in the equity markets remains uplifted, traders are moving away from the Greenback as Fed meeting approaches. As a result, the advantage of bullish votes increased even more over the past five trading days, up from 63% to almost 73%. Market participants also see the pair higher by Friday of this week, with the mean forecast being placed at 1.1450.


    A proponent of a near-term growth, RacerX, suggests that "with increasing skepticism about the Federal Reserve raising interest rates in the middle of next month and the unexpected devaluation of the Yuan, the Euro is looking increasingly attractive."

    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 27 and Aug 27 expect, on average, to see the currency pair around 1.10 by the end of November. Though the majority of participants, namely 51% of them, believe the exchange rate will be strongly below this mark in ninety days, with 30% alone seeing it below 1.06. Alongside, 21% 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

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