- Commands to buy the euro versus the dollar in 100-pip range from spot are staying strongly negative (28% bullish / 72% bearish)
- At the moment, the closest resistance for the pair is located at 1.1439
- In case of development to the south, the closest support is currently placed at 1.1268
- Upcoming events on February 3: Italy CPI (Jan), Eurozone PPI (Dec), France 10-y Bond Auction, US Factory Orders (Dec)
© Dukascopy Bank SA
The Euro zone economy has been mired in deflation for a second straight month in January, as consumer prices fell 0.6% on an annual basis, following the 0.2% drop in December. Alongside, German retail sales rose for a fifth straight year in 2014, increasing by 1.4% in real terms, pointing to the buoyant consumers' mood in Europe's number one economy. German consumer morale were positive last year as shoppers benefited from a strengthening labour market, rising wages as well as low inflation. Private consumption contributed a 1.5% increase to the nation's gross domestic product.
Meanwhile, Spanish growth data brightened analysts and politicians' mood, as Spain's GDP rose 2% in the year to the fourth quarter of 2014, compared with the 1.6% growth rate in the preceding three-month period. The economic output increased 0.7% on quarter in the October-December period, following the 0.5% expansion in the September quarter.
Watch More: Dukascopy TV
No major fundamentals expected to be published on Feb 3
Concerning the potential volatility of EUR/USD currency pair on Tuesday, it is likely to remain rather calm due to lack of important fundamental indicators that are awaited to be released on that day. At first, Italy and the Eurozone will announce the consumer and producer price index, respectively. This data will be followed by a government bond auction in France, as the country is preparing to sell securities with a maturity of 10 years. Besides that, US factory orders for December are estimated to come unchanged after a 0.7% drop in November.Read More: Fundamental Analysis
EUR/USD's drop to continue in the long-term
The long-term outlook for the EUR/USD currency pair is remaining bearish both in short and long-term. The ECB has made a long-awaited decision to expand asset purchases back on Jan 22, which will continue pushing the Euro to the downside. Moreover, the lowest point since the year 2003 around 1.1113 has already been hit by EUR/USD cross. Taking into account present monetary conditions and bearish outlook for the Euro, the pair has a chance to go below 1.10 towards the end of the first quarter of this year. Short-term bullish actions are still possible, but their impact and size are not expected to be appropriate for the common currency to commence a stable recovery. Moreover, some market participants suggest it may fall further and even trade towards the parity in course of this year.Daily chart
© Dukascopy Bank SA
Back on Friday, EUR/USD pair was only little changed during trading as the single currency remained under increased bearish pressure. The trading range, in turn, has consolidated between 1.13 and 1.1350 marks, while even a further drop in Eurozone CPI failed to make the Euro stronger. At the moment the pair is supported by the weekly PP at 1.1268 and the cross may continue staying above it in course of Monday.
Hourly chart
© Dukascopy Bank SA
Read More: Technical Analysis
Pending orders on EUR/USD at lowest level in 83 days
At the same time, commands to acquire the Euro in 100-pip range dropped to just 28% on Monday, the lowest level in 83 trading days. It means that, in case the pair increases in price, in the medium-term bearish pressure may stop the pair from climbing further around the weekly R1 at 1.1439.
On the other hand, if the Euro declines, total losses may potentially extend down to the weekly S1 at 1.1114 in the foreseeable future.
Spreads (avg,pip) / Trading volume / Volatility
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Jan 2 and Feb 2 expect, on average, to see the currency pair around 1.14 by the end of May. Though the majority of participants, namely 59% of them, believe the exchange rate will drop down even more below this mark in ninety days, with 32% alone seeing it below 1.10. Alongside, 19% of those surveyed reckon the price will trade in the range between 1.14 and 1.20 by the end of May of this year.
© Dukascopy Bank SA