- Sentiment among SWFX market participants is stable (46% bullish vs 54% bearish)
- 73% of all 100-pip pending orders are set to sell the Euro, the highest level in 10 months
- A recovery above 1.0850 will expose 55-day SMA (1.0845), as the bears are looking at 1.08
- More daily technical indicators are now bullish on the Euro than yesterday
- Economic events to watch in the next 72 hours: Spanish Parliamentary Election; US Services PMI (Dec) and Kansas Fed Manufacturing Activity Index (Dec); FOMC Member Lacker Speaks
German business confidence unexpectedly weakened in December amid some concerns over the domestic economy. The Ifo economic institute's business climate index, slid to 108.7 from 109.0 in November. The current assessment sub-survey, measuring current conditions in the German economy, came in at 112.8 points, slightly down from the previous month's figure of 113.4. At the same time, the Ifo expectations index, indicating projections for the next six months, remained unchanged at 104.78. Ifo revised down its expectations for 2015 growth in Germany to 1.7%. However, the think-tank predicted a faster pace of expansion of 1.9% for next year, partly buoyed by higher state spending on refugees. Meanwhile, the Bundesbank kept its 2016 growth outlook unchanged at 1.8% this month, saying that the Euro zone's number one economy is benefiting from "lively" domestic spending even as the export-oriented manufacturing sector struggles with uncertainty in emerging markets. A separate survey by the ZEW economic institute showed investor confidence in Germany climbed to a four-month high in December. ZEW's investor confidence index rose to 16.1 points, up from 10.4.
The number of Americans filing for unemployment benefits fell last week, a sign of the labour market's health. Initial jobless claims declined by 11,000 to a seasonally adjusted 271,000 in the week ended December 12, the Labor Department reported. Economists, however, had expected 275,000 new claims last week. Claims data is often volatile during the period between the Thanksgiving and New Year's holidays. The four-week moving average of claims, which irons out weekly ups and downs, dropped by 250 to 270,500 last week. Claims had fallen steadily since 2009 until this year, when they hit the lowest level in four decades in mid-July. In November, employers created a seasonally adjusted 211,000 jobs and added a robust 298,000 in October, suggesting the job market gained traction this fall. Earlier in the week, the Fed signalled its growing confidence in the world's number one economy and announced its first rate hike in almost a decade. The Fed raised its target for the federal funds rate, the rate at which banks lend money to one another, from 0% to 0.25%. By the end of next year, the US central bank expects the benchmark interest rate to climb to a median 1.375%, which implies four more 25 basis points increases over the coming 12 months. In 2017, officials are aiming to bring the policy rate up to 2.375%, which will take another four hikes.
Upcoming fundamentals: Richmond Fed President to comment first on Wednesday decisions
Following the historical Fed decision to raise interest rates for the first time in almost a decade, today an FOMC member Jeffrey Lacker will be the first to give a speech after the meeting. The Richmond Fed President who is considered to be one of the most hawkish FOMC members this year will talk about the 2016 economic outlook in Charlotte, North Carolina. Lacker was the FOMC member who dissented during the Fed's September and October meetings and argued in favour of hiking the Fed Funds target rate already earlier.
EUR/USD to be anchored by 20-day SMA
As expected, the EUR/USD cross managed to successfully test 20-day SMA and weekly S1 at 1.0850/45 yesterday. After touching the July low at 1.0808 the pair decided to bounce back and close the session at 1.0824. As daily technical indicators are giving stronger bullish signals, it is possible that some kind of a revival will take place on Friday. A climb back above the 20-day SMA will support the bulls to push EUR/USD up to 55-day SMA (1.0944) in the mid-term, while the bears are still hoping to see a sell-off continuing in the direction of the monthly pivot at 1.0724.Daily chart
Our near-term bearish forecasts are being confirmed by the one-hour chart. The pair is forming a down-leg, which commenced back on December 15. A test of 1.08 is still expected, which is going to be broadly reinforced by 200-hour SMA. The moving average is currently reversing its recent up-trend back to the south.
Hourly chart
Sentiment sees no change, as pending orders tumble to 10-month low
Alongside, neither bulls nor bears are gaining any more ground in other markets as well. At the moment of writing this Friday the bearish portions at OANDA and SAXO Bank were accounting for 59.43% and 62.90% of all transactions, respectively, meaning there are no fundamental changes from Thursday morning.
Spreads (avg,pip) / Trading volume / Volatility
Community members are divided in their opinions towards EUR/USD's movement this week
By Friday of this week, participants of the quiz suggest the most traded FX cross will hover somewhat above 1.08, down from last Friday's closing level of 1.10. Generally, market participants are widely undecided with respect to the pair's perspectives.
Concerning traders' opinions: "I believe the pair has reached its top for this month, namely 1.1050. The FED decision to raise interest rate is highly expected and this will certainly push the EUR/USD below 1.0830," says Nick Dundee. On the other hand, csan86 assumes that "the price broke through the last week's highs and tested the new levels. In my opinion, the trend is bullish, impulsive, and non-volatile in the long-term."