- SWFX market sentiment is 57% bullish
- Trader pending orders are 61% to sell
- Pair opened Tuesday's session at 1.0403
- Economic events to watch over the next 24 hours: EU Current Account
German business morale rose to the highest level in December since February 2014, suggesting the country's businesses were not affected by Donald Trump's surprise victory in the US presidential elections. The Munich-based Ifo Institute said its Business Climate Index, which is based on approximately 7,000 monthly survey responses in the manufacturing, construction, wholesale and retail sectors, advanced to 111.0 from 110.4 points seen in November, while market analysts anticipated a slight acceleration to 110.7 in the reported period. Shortly after, the Bundesbank said the German economy is likely rebounded more strongly than initially thought in the last quarter of 2016 after expanding just 0.2% quarter-over quarter and 1.5% year-over-year in the Q3. Ifo also reported the Current Assessment Index climbed to 116.6 points in December, following the preceding month's 115.6 and surpassing analysts' expectations for 115.9. Furthermore, the Business Expectations Index, which measures how local businesses foresee the next six months, increased to 105.6 in the same month from November's 105.5, matching economists' projections. As a result, the Euro rose slightly against the US Dollar and British Pound, trading at 1.0468 and 0.8381, respectively.
Consumer prices in the Euro zone advanced in line with analysts' expectations last month, official data showed on Friday. According to Eurostat, the headline Consumer Price Index was revised up to 0.6% in November, the highest level since April 2014, from the preliminary reading of 0.5%, meeting economists' projections. Data also showed that the so-called core CPI, which excludes food, energy, alcohol and tobacco prices, rose 0.8% in the 11th month of the year, matching the flash reading and consensus forecast. The price of energy dropped 0.2% and 1.1% month-over-month and year-over-year, respectively. The cost of non-energy industrial goods held steady in November, while prices of services declined 0.3% on a monthly basis, growing 1.1% in annual terms. The latest PMI survey signaled strong inflationary pressures in the Euro zone industrial sector. Moreover, analysts widely expect the weaker Euro, combined with higher oil prices, boost inflation in the region during the upcoming months, suggesting the headline rate could move above 1.0%. After the release, the EUR/USD rose to around 1.047 after hitting the lowest level since 2003 after the Federal Reserve raised its interest rate on Wednesday.
Upcoming fundamental releases: EU Current Account
There is only one fundamental data release, which has a slight chance to affect the strength of the common European currency. That would be the European Union Current Account, which will be released to the public at 9:00 GMT. However, traders have to take into account that the chance of this data release to even cause some minor increase in volatility is very slim.
EUR/USD trades below 1.04 mark
Daily Chart: The common European currency depreciated against the US Dollar on early Tuesday morning, as the currency exchange rate traded below the 1.04 mark. Previously, on Monday the currency pair traded near the 2015 low level, as it attempted to move higher during the early hours of the trading session. However, by the end of the day the Euro moved lower against the Greenback. It is most likely that the Euro will continue its fall, as the next support level is located at 1.0331, where the 2003 low level is located at.Daily chart
Hourly chart: The hourly chart reveals that the EUR/USD currency exchange rate has formed a descending channel pattern. The pattern formed in the aftermath of the pair's bounce off from the upper Bollinger band at 06:00 GMT. Since then the pattern's lower and upper trend line has been confirmed each two times. The channel is clearly aimed at the 2003 low level at 1.0331. Until that level there are no other notable levels of resistance.
Hourly chart
SWFX traders remain bullish
SWFX traders remain bullish on the pair, as 57% of open positions were long on Tuesday. Meanwhile, trader set up orders were largely bearish, as 61% of pending commands were set up to sell the Euro.
OANDA trader sentiment remained almost unchanged on Tuesday, as 57.85% of open EUR/USD positions were long, compared to 55.90% on Monday. Meanwhile, SAXO bank traders were almost neutral, as 52.34% of open positions were long.