- 58% of all SWFX positions are bearish
- Pending orders changed preferences and now they foresee a plunge
- Initial resistance is the weekly R2 at 1.1377, which is safeguarding the February peak 40 pips higher
- Daily technical indicators are not thinking about changing their bullish opinion
- Economic events to watch over the next 24 hours: German Retail Sales (Feb) and Unemployment Change (Mar); Spanish Retail Sales (Feb); Euro zone CPI (Mar); US Unemployment Claims (Mar 26) and Chicago PMI (Mar); FOMC Members Dudley and Evans Speak
German inflation unexpectedly turned positive in March, a sign that domestic demand as well as ECB massive stimulus may be starting to boost price gains. Measured on an annual basis, German CPI rose 0.3%, exceeding forecast for a 0.1% gain and following zero growth in February. German prices, harmonised to compare with other European countries, climbed 0.1% on the year after declining by 0.2% in February. Before the German data, economists had projected that the Euro area's inflation was at minus 0.1% in March, up from a minus 0.2% in February. Eurostat will publish figures later in the day. In March, the ECB projected inflation in the region would accelerate to 1.3% in 2017 and 1.6 % in 2018. The Euro zone economy is "flying on one engine," according to Standard and Poor's, which cut its growth and inflation forecasts for the region. The rating agency trimmed its growth projections from 1.8% to 1.5% this year and to 1.6% in 2017, citing a "sudden decompression" in the EU economy, which followed months of market turbulence between the end of 2015 and the beginning of 2016. Standard & Poor's also revised its headline inflation forecast to 0.4% for this year versus a previous 1.1% estimate. Inflation in the Euro zone is expected to reach 1.4% next year, slightly lower than the original 1.5% forecast.
Japan's industrial production declined the most since March 2011 earthquake as declining exports curtailed demand and amid a nationwide output shutdown at Toyota Motor Corp. Industrial output plunged 6.2% in February from the previous month, according to the Ministry of Economy. The government expects that output will increase 3.9% this month and 5.3% in April. Yet, the decline in output was likely exaggerated by Japan's largest automaker stopping production at all its factories in Japan between Feb. 8-13. Toyota halted output due to a problem with parts supplies stemming from an explosion at a steel maker Aichi Steel Corp. on Jan. 8. Nevertheless, the data suggest industrial production is undermining growth in the first quarter, adding to signs of weakness in the world's third biggest economy in early 2016, after a 1.1% annualized contraction in real GDP in the last three months of 2015. Economists predict the Japanese economy to grow 0.6% in the January-March period. However, if Japan's GDP contracts again, that would be the sixth quarterly contraction and second recession since Shinzo Abe returned as prime minister in December 2012. A number of economists already expect the BoJ to announce an expansion of the asset-buying programme or to lower interest rates further, having already deployed a negative interest rate strategy in January.
Upcoming fundamentals: All eyes on Euro zone inflation as ECB starts expanding QE
Thursday is going to be a very busy day in all regions worldwide. In Europe, economists are looking forward to getting preliminary inflation numbers for March. The headline reading, published at 9:00 GMT, is set to rebound off the six-month low and grow to -0.1%. On a core basis, which excludes change in energy prices, it is expected to rise from 0.8% to 0.9% in the reported month. In the US, traders' attention will be turned to the weekly data on claims for unemployment benefits for the period ended March 26. At 14:45 GMT we have the Chicago PMI due, with experts assuming that the indicator surged to 50.7 points in March from a surprisingly low reading of 47.6 points in the preceding month. At 21:00 GMT the New York Fed president and a permanent voting member of the FOMC William Dudley will speak in Virginia about the Fed's role during financial crisis and lessons from it. During the same event the Chicago Fed chief Charles Evans will take the stage at 22:00 GMT.
EUR/USD at risk of sinking from weekly R2
With recovering volume of trading, the Euro continued to grow in value against the Greenback on Wednesday. Consolidation above the first downtrend line led to a spike above the second downtrend placed near 1.1325. The rally was capped by the weekly R2 at 1.1337, which is the last supply under the February high at 1.1377. We would allow for a short-term correction lower, but dips below 1.12 are unlikely today. Alongside, by eroding the upper Bollinger band at 1.14 the cross will set eye on the October 2015 high at 1.1495.Daily chart
Bullish outlook within the one-hour chart is maintained for the time being. We continue forecasting an upward movement in the direction of the September 2015 high at 1.1459, which is followed by the aforementioned October peak under 1.15. In the meantime, any failure at the 200-hour SMA, currently at 1.1220, should renew the talks about sustainability of the Feb-Mar trend-line around 1.11.
Hourly chart
Pending orders below 50% for the first time in six days
Seven out of ten SAXO Bank clients are ready to sell the Euro against the Dollar for the moment. Alongside, advantage of OANDA's short participants widened significantly on the basis of the past 24 hours. Now there are as many as 63.29% of bearish transactions, while the bulls are holding only 36.71% of all trades.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members continue predicting losses for EUR/USD
Community members believe the pair will be able to slip to 1.10 by this Friday, just slightly below the weekly S2. The number of bulls and bears is almost equal, hence, the outlook is unclear, but still, the bearish votes weight. Technical indicators, in turn, do not give a clear ‘buy' or ‘sell' signal. According to Jignesh's views, "after a quiet week, the EUR/USD is setting up for a volatile week ahead. Early in the week we have Yellen speaking and the USD can be heavy ahead and possibly during. Though bearish pressure may kick in mid week, the pair is largely supported to the downside as the pair remains in a broader bullish cycle. The directional move may occur late in the week on the back of NFP."
A bearish opinion is provided by Besim. He generally suggests that "The EUR/USD dipped 16 points on the holiday to trade at 1.1160 with no major data announcements, except for US GDP. American data have steadily improved over the last few weeks, with Bloomberg's gauge of economic surprises climbing to the most positive level in more than a year."