- Short traders fixed profit, SWFX sentiment changed from 55% negative to neutral
- Pending orders in 100-pip range tumbled, bullish share down to 42%
- EUR/USD closed below 200-day SMA on Thursday after losing 230 pips in one day
- Daily technical indicators deteriorated, aggregate outlook is now mixed on daily and weekly time frames
- Economic events to watch in the next 24 hours: French, German, and Euro zone Manufacturing/Services PMI (Oct); Italian Industrial Orders (Aug) and Retail Sales (Aug); US Manufacturing PMI (Oct)
Additionally on the topic, the European Central Bank maintained interest rates unchanged at a record low 0.05% and kept the deposit rate and marginal lending rate at –0.2% and 0.3%, respectively. However, ECB President Mario Draghi said that the central bank is ready to deploy another big-bang stimulus package, which could include more bond purchases and a cut to the already negative deposit rate. Financial markets surged amid expectations of extra ECB stimulus measures, whereas the Euro plunged to the lowest level in two weeks versus the US Dollar of $1.1152. Draghi's statement concerning additional stimulus underscores the fragile state of the global economy. ECB President also revealed that some policy makers of the governing council had insisted on taking more action to underpin the region's economy immediately, blaming the downturn in the emerging markets, including China, for renewed weakness in the Euro bloc.
In other regions, the number of Americans seeking unemployment benefits rose less than expected last week, but the figure remained at a historically low level. Initial jobless claims rose by 3,000 to a seasonally adjusted 259,000 in the week ended October 17, the Labor Department reported. Economists, however, had expected 265,000 new claims. At the same time claims for the October 10 week were revised up by 1,000 to 256,000, just above the 42-year low hit in July. The four-week moving average of claims, which evens out weekly volatility, declined by 2,000 to 263,250 last week, the lowest average level since December 1973. Meanwhile, the number of people continuing to receive unemployment benefits increased by 6,000 to 2.17 million in the week ended October 10.
Upcoming fundamentals: Euro zone PMI data to be little affected by ECB comments
We expect to get important PMI numbers from the biggest economies in the Euro zone and the US today. They will not reflect yesterday's ECB comments about the possibility of additional monetary stimulus. Therefore, a moderate decline on all fronts is estimated by market analysts, due to recent market turmoil and weakness in China. Nevertheless, all indicators should stay above the 50-points threshold, according to the survey. French data is due at 7:00 GMT, followed by Germany and 7:30 GMT and the Euro zone 30 minutes later. Euro area's Manufacturing PMI forecast stays at 51.8 points, while Services PMI is projected to decrease from 53.7 to 53.6 points.
EUR/USD crashes 230 pips on Draghi's comments
Pressure on the EUR/USD currency pair was enormous on Thursday, following the ultra-dovish ECB press conference. A drop exceeded all expectations as the pair lost more than two figures and even fell below the 200-day SMA to close the trading session at 1.1108, down from the day's opening level of 1.1338. EUR/USD was only stopped by the Sep low at 1.1086, a breach of which on Friday will definitely expose the monthly S1 at 1.1022, followed by monthly S2 at 1.0868. Some rebound is not off the table, but overall sentiment remains largely dovish.Daily chart
In the one-hour chart there is a clear indication that EUR/USD's slide was stopped not only by the Sep low at 1.1086, but also by the March-October uptrend. Despite all, our outlook has switched considerably to the downside as expectations of the extra ECB stimulus are likely to continue to weigh on pricing of the Euro in the medium term.
Hourly chart
SWFX sentiment surges as short positions fix profit
Sentiment picture has also dramatically changed at OANDA and SAXO Bank. While the majority (56%) of SAXO Bank clients still expect EUR/USD to lose value, the portion of short positions dipped from 69% seen yesterday. However, OANDA traders are now bullish in 55% of all cases, even though on Thursday morning green trades were taking up only 41% of the market.
Spreads (avg,pip) / Trading volume / Volatility
Community members forecast the Euro to grow against the US Dollar this week
In a week time, the sentiment on this currency pair changed significantly, as now 60% of traders predict the Euro to gain in value. Meanwhile, the consensus forecast for this Friday, October 23 stands at 1.14.
According to the Berkeley who supports the bullish move "the EUR/USD fell on Friday and retreated 0.35% to 1.1347 in late trade and ended the week 0.18% lower. On 19th October it is pulled back to 1.1305, but I think it will get back up to 1.1370-1.1450." However, Daytrader21 supposes that there is still no clear direction for EUR/USD.