- SWFX market sentiment is 53% bearish
- Pending commands in the 100-pip range are 53% long
- Pair dropped to the 1.12 level on Tuesday
- Aggregate daily technical indicators bet EUR/USD will appreciate
- Economic events to watch over the next 24 hours: ECB's Praet Speech; EU CPI (May); US CPI (May); US Initial Jobless Claims (June 11); Eurogroup Meetings; US NAHB Housing Market Index (June); ECB's Mersch Speech; EU ECOFIN Meetings; EU Current Account (April)
US Federal Reserve was forced to keep the target range for the Federal Funds rate flat at 0.25-0.50% after its June 14-15 meeting, owing to continuous risks to economic outlook and stagnating inflation expectations. Domestic data has been uneven recently, with mild payrolls report considered to be the key trigger for accepting the status-quo. All member of the Federal Open Market Committee (FOMC) voted for the decision, with Kansas City Fed President Esther George abandoning her hawkish call to raise the benchmark by 25 basis points. Janet Yellen, the Chair, agreed that there are some downside forces to interest rates that may be longlasting. On the short-term basis, she admitted that the upcoming UK referendum on EU membership has weighed on the Fed's decision to postpone the upward revision to the Fed Funds target range. The famous dot plot, which reveals individual members' perceptions of how interest rates are going to evolve in the future, showed that participants continue eyeing two interest rate hikes in 2016 and three in 2017. The terminal rate for the long run has shifted down to 3% from 3.3% in the March projection. The Fed estimates a 2% GDP growth every year during 2016-2018, also reflecting a moderate downward change in the outlook. Consumer prices, measured by the PCE Index, however, are forecasted to increase 1.4% this year. This indicates to an improvement from 1.2% seen three months ago.
Unemployment in Britain declined to the lowest level since Ocotber 2005, indicating that the UK labour market has contineud to tighten. The jobless rate slid to 5% in the three months through April, according to the Office for National Statistics. The decline came as a surprise to economists, who had predicted the reading to remain unchanged at 5.1%. Employment was strong in the reported period, surging by 55,000, with the employment rate remaining at a record high of 74.2%. The claimant count rate was unchanged at 2.2% following a revision for April, the ONS reported. At the same time, wage growth, excluding bonuses, unexpectedly gathered pace in the three months to April to a 2.3%, from a revised 2.2% reported in March. When bonuses are included, the rate of pay growth also remained steady at 2% compared with economists' expectations for a decline to 1.6%. Wages, however, have remained significantly below the levels seen before the financial crisis. Low inflation has undermined earnings growth as it limits workers' bargaining power with employees. The pace of wage growth is unlikely unnerve the BoE's officials, who are predicted to keep the key rate at a record low 0.5% later in the day. They are watching closely the labour market for signs of tightening, which in turn could boost inflation.
Upcoming fundamentals: CPI data and various meetings in Europe
This Thursday is a busy day on both sides of the Atlantic, as there are various data releases both in the European Union and the United States. First of all ECB's Praet speaks at 8:30 GM. Afterwards come the CPI data with the EU CPI for May at 9:00 GMT and the US CPI data at 12:30 GMT. At the same time, as the US CPI data comes out, the US will publish the Initial Jobless Claims for last week. At 13:00 GMT the Eurogroup has a meeting, and an hour later at 14:00 GMT the US NAHB Housing Market Index will be published. The day will end with a speech given by ECB's Mersch at 15:15 GMT. Tomorrow morning traders should keep their eyes open for the EU Current Account data.
EUR/USD fluctuates around 1.127 on Thursday
Daily chart: The European currency booked gains on Wednesday against the US Dollar, as it rebounded off the first weekly support at 1.1192. At the moment, the currency pair is at 1.1276, and it is struggling with the monthly PP at 1.1282, which is supported by additional resistance provided above by the weekly PP at 1.1304 and the 55-day SMA at 1.1310. If the currency exchange rate breaks through this resistance cluster, it will move upwards to the first weekly resistance at 1.1362. However, in case of a bounce off from the cluster, the rate will move down, where it will face the 100-day SMA at 1.1223.Daily chart
Hourly chart: On the hourly chart, it can be clearly seen, that the currency pair touched the weekly S1 at 1.1192 around midnight between Tuesday and Wednesday. Afterwards, the exchange rate rebounded and has not met any significant resistance since then. The only exceptions are the 20, 55 and 100 hour simple moving averages. However, the pair has again reached the monthly PP at 1.1282, against which it has already bounced off once yesterday evening. Aggregate daily technical indicators forecast a surge for the pair, and it would mean, that it will break through the monthly PP.
Hourly chart
SWFX traders return to previous bearish sentiment on Thursday
OANDA trader bearish sentiment has decreased compared to Wednesday, as 54.77% of open positions are short. However, SAXO Bank clients have increased their bearish stance, as their open short positions are now at 62.20% compared to 61.60% yesterday.
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade at 1.12 by August
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between May 16 and June 16 expect, on average, the currency pair around 1.12 by the end of August. Though 45% (+2%) of participants believe the exchange rate will be generally below 1.12 in ninety days, with 25% (+5%) alone seeing it below 1.08. Alongside, only 28% (+9%) of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on August 31.Dukascopy Community members are bearish on this week's perspectives of EUR/USD
61.1% of the Dukascopy Community members are expecting a surge in the value of the Euro against the Greenback by the end of this working week. The median estimate for June 17 stands slightly at 1.134. Among traders, nuonrg suggests that "The Euro closed the week below 4h momentum. We might get a squeeze lower into the daily trend line before trying higher prices".
At the same time, trader megajorko is bearish stating that "After returning to previous levels and breaking all supports possible the pair is again in bearish mode with possibility to reach new lows on Fed interest increase. The start of the big spike up was due to lower than expected NFP number but with this effect fading out I believe that 1.14 was the top for the pair for a long time".