- SWFX market sentiment is 52% bullish
- Trader pending orders are 61% to sell
- Pair opened Monday's session at 1.0762
- Economic events to watch over the next 24 hours: ECOFIN meetings, US revised non-farm productivity, US trade balance, US factory orders
The United States' services sector activity hit its one-year high last month, official figures revealed on Monday. The Institute of Supply Management reported its Non-Manufacturing Purchasing Managers' Index advanced to 57.2 in November from the previous month's 54.8 points. The November figure was the highest since October 2015 and marked the 82nd straight month of growth in the sector, while analysts anticipated the Index to come in at 55.3 in the reported month. Any reading above the 50 point level indicates expansion in the services sector, which accounts for more than twothirds of the US economy. Furthermore, the Employment Index climbed to 58.2 from October's 53.1 points, showing that hiring rose at a much faster pace in November. The Non-Manufacturing Business Activity Index rose to 61.7 from 57.7 in October, while the New Orders Index dropped to 57.0 from 57.7 and the Prices Index came in at 56.3, losing 0.3 points during November. The majority of respondents expressed a positive view of the economy. Earlier, Markit's final Services PMI for the US came in at 54.6, slightly below the 54.8 point forecast. As a result, the EUR/USD was unchanged at 1.0728, while the GBP/USD fell to 1.2712 from 1.2716 from ahead of the release and the USD/JPY rose from 114.37 to 114.62.
Corporate lending in the Euro zone advanced at the fastest pace since June 2011 in October, while the total amount of currency in circulation fell, official figures showed on Monday. According to the European Central Bank, lending to firms rose 2.1% on a monthly basis in October, the fastest pace in more than five years, following the preceding month's gain of 2.0%. Lending to households climbed 1.8% on an annual basis in the same month, unchanged from the September reading, whereas market analysts anticipated a slight increase to 1.9%. A measure of the money supply in the region, known as M3, grew 4.4% year-over-year in October, down from the prior month's 5.1% and below the 5.0% increase market forecast. The Central bank's policymakers are widely expected to extend their quantitative easing program by six months at their next meeting on December 8. According to the OECD's latest forecasts published on Monday, the Euro zone is set to grow 1.7% in 2016 and 1.6% in 2016, both figures were revised up from the September estimates despite the post-Brexit uncertainties. Moreover, later on the same day, Mario Draghi said in his speech to the European Parliament that the economy managed to overcome major challenges caused by Britain's decision to leave the European Union.
Upcoming fundamentals: ECOFIN meetings, US revised non-farm productivity, US trade balance, US factory orders
Volatility could be added by some fundamental data releases further down the day, with the ECOFIN meetings all day, as well as a set of US data – revised non-farm productivity and trade balance at 13:30 GMT, followed by factory orders at 15:00 GMT. The Euro received positive news Tuesday morning, when the German factory orders came in to top investors' forecasts of 0.6% with a reading of 4.9%.
EUR/USD squeezed between levels of significance
Daily Chart: Following a volatile session on Monday, EUR/USD took on where it had left off Tuesday morning, posting a red candle outside of the hourly channel at 1.0730. Below the channel line, the pair will test 1.0718/09 if it manages to re-enter the pattern. A successful close below would lead to the channel bottom boundary – weekly Pivot Point confluence around 1.0643/52. In case the motion reverses, the rate will attempt the immediate resistance at 1.0772, with more risk at 1.0802. Nevertheless, the rate could remain squeezed between the channel line and weekly R2 as it is now.Daily chart
Hourly chart: Shaken out of the week-long ascending channel during Italy's election day, EUR/USD overstepped both trend lines on the hourly chart to ultimately surge above the pattern amid increased volatility. Considering the ease, with which the pair exited and re-entered the pattern from the downside, it could as well return inside on the current motion south. However, we lean in favour of a retracement from the broken trend-line around 1.0717 and some repeated tests of the weekly R2 at 1.0772. However, in case the channel is reinforced, the 55-hour SMA will serve as the first level to stick to inside of the pattern.
Hourly chart
Sentiment remains bullish
SWFX traders have slightly mitigated their optimism, as 52% of open positions are now long, down from 53% on Monday. Meanwhile, pending orders are bearish, as 61% of commands are to sell the Euro.
OANDA traders decreased their bullish outlook, as 55.53% of open EUR/USD positions were long on Tuesday morning, compared to 60.63% on Monday, but still show a majority of traders being optimistic. In addition, SAXO Bank clients have also become less optimistic with 43.66% of all positions being bought, compared to 50.49% on the previous trading session.