- More short traders have come to the SWFX market, as Euro's jump fixed profit from long positions
- Pending orders improved; 53% of them are set to acquire EUR/USD in 100-pip from the spot
- There is a risk of correction lower from the weekly R2, which contained the post-ECB rally
- Weekly technical indicators see the pair growing
- Economic events to watch over the next 24 hours: German CPI (Feb); Italian Industrial Production (Jan)
European Central Bank President Mario Draghi unveiled bold easing measures, slashing interest rates and expanding asset purchases, in a bid to revive the Euro zone's struggling economy. The Frankfurt-based central bank cut the interest rate on the main refinancing operations by five basis points to zero, slashed deposit rate by 10 basis points to –0.4% and trimmed the marginal lending rate, used by banks to borrow from the ECB overnight, to 0.25% from 0.3%. On top of that, the ECB raised monthly asset purchases to 80 billion euros from 60 billion euros. Mr Draghi said that the central bank's stimulus measures are indented to last until March 2017 or longer if necessary. Moreover, the ECB chief implied interest rates would remain very low for at least another year, but played down expectations they could be slashed even further. ECB President said that the central bank's staff had revised downwards its inflation and growth expectations, estimating that even with extra stimulus, price growth will not reach its target for years to come and growth will weaken. The ECB predicts the annual GDP growth of 1.4% this year, down from 1.7% in the previous outlook in December. Also, Draghi cited a host of risks to economic growth from stumbling emerging economies, volatile financial markets and the snail pace of structural reforms.
New Zealand's manufacturing activity slowed last month, according to the latest BNZ-BusinessNZ Performance of Manufacturing Index. The seasonally adjusted PMI for February declined to 56.0, down 2.0 points from January. New Zealand's manufacturing industry has now been in expansion for 39 months in a row. However, the employment index plunged to 48.5 in February, down from 54.7 in January. While the New Zealand economy is growing at above 2% per annum, weak inflation expectations, low dairy prices, as well as clouded global economic outlook spurred a surprising interest rate cut from the Reserve Bank of New Zealand earlier this week. The central bank slashed unexpectedly the Official Cash Rate to a record low of 2.25%. Yet, the RBNZ revised upwards its economic growth forecasts. The central bank now expects annual average economic growth rate of 2.3% this year, compared with 2.2% in the December forecasts, and a 3.1% growth pace, an upgrade from its previous forecast of 2.9%. Growth is expected to be supported by high immigration, construction activity, tourism and loosen monetary policy. Meanwhile, financial markets are expecting one more rate cut from the RBNZ this year, with most economists betting on June as the most likely timing for the move.
Upcoming fundamentals: Silent session expected after busy Thursday
There are few fundamentals expected to be released in Europe on Friday. Generally, the trading is likely to be tranquil when trying to access the importance of decisions taken by the European Central Bank yesterday. Industrial output in Italy, the third largest economy of the Euro zone, is up at 9:00 GMT. Analysts forecast a considerable rebound of 0.7% in January after the same pace of drop in December.
EUR/USD soars to 1.1176 in volatile ECB session
Markets finished the trading session yesterday in a slightly disappointing mood, which ultimately sent the EUR/USD cross as high as the second weekly resistance at 1.1176. However, intraday losses were extending to 1.0820, but Mario Draghi's hawkish comments changed in final state of affairs. As the weekly R2 managed to contain a rally, we can expect a setback from this supply on Friday. In case the pair closes anywhere above 1.1043 (200-day SMA) today, the outlook for the future will become much more bullish than at the moment.Daily chart
Even despite such a rapid growth we have observed over the past 24 hours, the outlook in the 1H chart remains uncertain. We have to see a consolidation above 1.1020 (uptrend line) in order to start focusing on higher levels, meaning EUR/USD should trade above this mark at least throughout Friday. Meanwhile, the next massive resistance area is placed between 1.1450 and 1.15, where September and October 2015 highs are accompanied by the Dec-Feb uptrend.
Hourly chart
Sentiment deteriorates as traders close long positions
While the gap between the bulls and bears widened only marginally in the SWFX market, OANDA and SAXO Bank clients turned much more negative with respect to the observed currency pair. For now only 36% of OANDA market participants are long, down from 45% yesterday. As for SAXO Bank, here the bullish portion dipped as low as 31%.
Spreads (avg,pip) / Trading volume / Volatility
More than three fourths of Dukascopy traders see the Euro higher against Greenback
In this week's time, the sentiment on this currency pair changed significantly, as now 76% of traders predict the Euro to rise in value. Among important news, on Thursday, the ECB is to announce its monetary policy decision. The rate announcement will be followed by a post-policy meeting press conference with President Mario Draghi.
As for opinions among members of the Dukascopy Community, williamb assumes that "this pair is ready to rise because it is oversold. Fundamentals also could contribute to pair's increase due to the weakness in the Asian market." From the other side of the coin, Khimit thinks that "the pair is running on a downtrend and a second break is visible around 1.10 mark. I am expecting a downtrend continuation.