EUR/USD steady for eight consecutive day

Source: Dukascopy Bank SA
  • 59% of all positions are short, down from 61% yesterday
  • More than 50% of all pending commands are set to get rid of the Euro
  • Current narrow trading to be bounded between 1.1457 (weekly R1) and 1.1329 (weekly S1)
  • Both daily and weekly technical indicators foresee EUR/USD's rally
  • Economic events to watch over the next 24 hours: German CPI (Mar); Swedish CPI (Mar); FOMC Members Harker, Williams and Lacker Speak; US Monthly Budget Statement (Mar) and Import Price Index (Mar)

© Dukascopy Bank SA
Yesterday the Euro was an active trading currency against all its counterparts but the US Dollar and the Japanese Yen. Greenback's buyers and sellers are maintaining the equal level of importance for a number of consecutive sessions already, and the volatility is not caused even by remarks that are made by top officials. Yesterday the Dallas Fed President Robert Kaplan said he is not going to support the April interest rate hike, but he is open-minded about possibility of the move in June. Kaplan added there is a lack of information about economic performance to justify growing interest rates later this month. As for the Yen, market participants seem to be awaiting further signals on the side of Japan's monetary policy and additional accommodation the Bank of Japan may offer in the foreseeable future. EUR/JPY's change of only five basis points followed major losses the pair had experienced earlier last week. Meanwhile, continuously rebounding oil prices are sending commodity-backed currencies higher. On Monday all of them were up by 0.5-0.7%. The biggest gainer of the day, however, was the Sterling. It added 0.7% versus the Euro amid a rise in pan-market risk appetite and in anticipation of today's UK inflation figures.

German politicians and officials have repeatedly brutally castigated the European Central Bank for its monetary policy, with the latest critics coming from the outspoken German Finance Minister Wolfgang Schaeuble. Central banks in Europe and the US must gradually abandon easy-money policies, Mr Schaeuble said. He also partly blamed the ECB's policy for the success of the right-wing Alternative for Germany (AfD) in recent regional elections. Mr. Schaeuble and ECB President Mario Draghi will probably hold talks in Washington this week. G-20 policy makers will meet from April 14-15, with finance ministers and central-bank governors from 188 countries gathering from April 15-17 for the spring meetings of the IMF and World Bank to discuss how to revive weak global growth. In March the ECB unveiled a large stimulus package that included bringing the deposit rate deeper into negative territory, expanding asset purchases and offering free loans to the corporate sector to stimulate growth. The Euro zone economy expanded at a weaker pace in March than first estimated. The preliminary measure of activity in the manufacturing and services sectors pointed to a recovery as the first quarter drew to a close. Yet the final composite purchasing managers' index last week showed a less encouraging story, indicating that first-quarter activity climbed at the slowest pace since the final three months of 2014.

Australia's business conditions and confidence improved significantly in March, suggesting a broad based economic recovery may be round the corner. The National Australia Bank Business Confidence Index surged from 3 in February to 6 last month, while the NAB Business Conditions Index soared 8 to 12, the highest reading since the global financial crisis. Importantly, the increase was driven by an improvement in the three main components of the conditions index: trade, profit and employment. The employment sub-index of the confidence barometer was particularly sturdy, rising up 4 points to 5, while improved capacity utilisation indicates this trend will persist. The headline improvement in conditions and sentiment spread to most sectors and industries, with even underperformers such as manufacturing and transport more optimistic on their prospects. Last week the Reserve Bank of Australia kept the official cash rate at a record-low 2.0%, but expressed its discontent with the recent strength of the Australian Dollar. However, the business survey indicates that despite the appreciation of the Aussie Dollar, firms are upbeat on how the domestic economy is progressing.

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Upcoming fundamentals: More Fed speakers take stage, European inflation data due



Tuesday is going to become another busy trading day in both Europe and the US, meaning we may see more volatility of the FX market later in the day. German inflation is first up at 9:00 GMT, but it is going to be published by the time this report is released. Sweden's consumer prices are in turn going to be announced at 7:30 GMT. A monthly CPI increase in March is projected at 0.4% after a 0.3% pick up in February. This may push the annual inflation reading up to 0.6% from 0.4%, which is going to raise questions about necessity of keeping the Riksbank's interest rates as low as they are now. In America, Patrick Harker from the Philadelphia Federal Reserve Bank is going to speak about economic outlook at 13:00 GMT. At 19:00 GMT a voting member of FOMC, John Williams from San Francisco, will speak as well. One of the most hawkish policymakers, Jeffrey Lacker from Richmond Fed, will talk in North Carolina at 20:00 GMT.


EUR/USD steady for eight consecutive day

Since the first day of April the EUR/USD pair has been ending all trading sessions with no material change in its value, while the volume has seen in a decline too. On Tuesday morning the conditions are similar, even though the cross is now hovering above 1.14. Thus, we keep our reasonably bullish bias and the mid-term caps should be found at 1.15 (October high). Daily technical indicators are positive as well. Any intraday losses, although they are less likely, will initially have to tackle the weekly pivot point at 1.1391.

Daily chart
© Dukascopy Bank SA

The pair remains as much as quiet in the 1H chart as it is in the daily chart. The 200-hour SMA, currently at 1.1384, allow for no selloff at the moment. Alongside, the bulls are still eyeing the September 2015 peak at 1.1459, which is boosted by the April 1-7 uptrend.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment becomes more optimistic, but bears have an overall majority

For the first time in six working days the total percentage of bullish traders went up above 40%. Now their SWFX portion stands at 41%, up from 39% we had seen exactly one day ago. Nevertheless, the fact of a formidable bearish majority remains undisputable and the same applies for the pending orders. Right now about 52% of all commands in the 50-pip range around the spot are going short with respect to the 19-nation currency, while the 100-pip orders are 60% bearish.

OANDA market sentiment on the EUR/USD currency pair has picked up over Monday. Still, only slightly more than 35% of all their positions are bullish. As for SAXO Bank, there the bears are defending an overwhelmingly dominant position, by sustaining the market share beyond 70%.












Spreads (avg,pip) / Trading volume / Volatility



Average forecast says EUR/USD will trade at 1.12 by July

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between March 12 and April 12 expect, on average, to see the currency pair around 1.12 by the end of July. Though 53% of participants believe the exchange rate will be generally below this important level in ninety days, with 35% alone seeing it below 1.08. Alongside, 30% of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on July 31.

© Dukascopy Bank SA

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