- SWFX market sentiment is 59% bullish
- Trader pending orders are 63% to sell
- Pair opened Monday's session at the 1.0881 level
- Aggregate daily technical indicators bet EUR/USD will fall
- Economic events to watch over the next 24 hours: French Flash Manufacturing PMI; French Flash Services PMI; German Flash Manufacturing PMI; German Flash Services PMI; EU Flash Manufacturing PMI; EU Flash Services PMI; FOMC Member Dudley Speaks; FOMC Member Bullard Speaks
The European Central Bank left interest rates on hold and kept its 1.74 trillion euro ($1.95 trillion) asset buying scheme running in order to boost economic growth and inflation at its October monetary policy meeting on Thursday. As analysts predicted, the benchmark overnight deposit interest rate was left unchanged at - 0.40%; however, the majority of them expect the Bank to announce an extension of asset purchases at the Governing Council meeting in December. Furthermore, the Central bank said it continues to expect the key interest rates to remain at present or even lower levels for an extended period of time, and well past the horizon of the net asset purchases. It also noted that the 80 billion euro asset purchase program is intended to run until March 2017, or beyond, if necessary to raise inflation. Back in September, inflation reached its highest level since 2014, albeit that level was just 0.4%, and according to the latest forecasts released by the ECB it is unlikely to hit its close to 2% target until the end of 2018 or early 2019. The ECB, in response to weak growth, low inflation and high unemployment, was forced to provide additional monetary stimulus, cutting interest rates into the negative territory and launching its QE program.
Manufacturing activity dropped less than expected in the Third Federal Reserve District, a monthly report revealed on Thursday. The Philly Fed's Manufacturing Index came in at 9.7 in October, compared to last month's 12.8, while market analysts anticipated a steeper decrease to 5.2 during the reported period. However, the three-month average rose to 8.2 in October from the previous month's 2.7 points. Furthermore, the six-month outlook advanced to 38.6 from September's 35.2. Other data released by the US Department of Labor showed the number first-time claims for state unemployment benefits increased 13,000 to a seasonally adjusted 260,000 in the week ended October 15, following the preceding week's upwardly revised figure of 247,000 and falling behind the 251,000 market forecast. Filings for US unemployment benefits remained below the 300,000 level for the 85th consecutive week, the longest streak since 1973. The increase in initial claims was partly due to Hurricane Matthew, which caused flooding and damage in the Southeast region. The four-week moving average, considered as a better measure of labor market trends, jumped 2,250 to 251,750 last week. Moreover, continuous claims rose 7,000 to 2.06 million in the week ending October 8.
Upcoming fundamentals: EU PMIs and FOMC speakers
The EUR/USD currency exchange rate will be affected from both sides of the Atlantic during Monday's trading session. First of all, starting at 7:00 GMT the European countries will begin publishing their Flash Manufacturing and Services PMIs. However, the data from two countries is only to be watched. At 7:00 GMT the French release their data. Afterwards, at 7:30 GMT the Germans publish their findings, and at 8:00 GMT the combined Eurozone's indices will be available. The strength of the US Dollar on Monday will not be affected by any data release. However, there are two members of the FOMC set to speak during the day almost at the same time. At 13:00 GMT Dudley gives a speech, and at 13:05 Bullard is set to speak.
EUR/USD approaches seven month low
Daily chart: The common European currency began the week by treading even lower against the US Dollar, as the currency exchange rate approached the seven month low level of 1.0822, which is represented by the March low level. It is most likely that the rate will fall to the combined support level of the March low and the first weekly support level of 1.0814 and mark a full week of losses. Although, the newly calculated weekly aggregate technical indicators forecast no change in the pair by the end of the week.Daily chart
Hourly chart: The hourly chart for the EUR/USD pair reveals nothing significant. The currency exchange rate has been slowly moving lower during Friday's session and the morning on Monday, as it bounced between the 20-day SMA and the lower Bollinger band.
Hourly chart
SWFX outlook remains unchanged
SWFX traders have not changed their combined opinion, as open positions and pending commands remain unchanged, respectively, 59% long and 63% to sell.
OANDA traders have increased their bullishness on Monday, as 63.12% of open EUR/USD positions are long. In addition, SAXO Bank clients have increased their bullish sentiment, as open long positions now add up to 53.19%, compared to 52.38% during the previous trading session.