- Portion of the orders to sell the Euro increased from 60 to 63%
- Sentiment is still neutral
- The closest significant resistance is the down-trend at 1.14
- Key support is at 1.13
- Upcoming events: Italy Trade Balance (Jan), ECB President Mario Draghi's Speech in Brussels, Federal Reserve Chair Janet Yellen's Speech in US Congress (Day 2), US New Home Sales (Jan)
The final data confirmed that the German economy managed to move further away from recession territory, receiving a boost from domestic spending and exports. Germany's GDP expanded 0.7% in the December quarter, the Federal Statistics Office reported. Private consumption rose 0.8%, contributing 0.5 percentage points to economic growth in the fourth quarter, and exports surged 1.3%, adding 0.2 percentage points. A separate report showed Euro zone inflation fell to levels last seen during the global financial crisis due to a precipitous decline in oil prices. On an annual basis, consumer prices in the Euro bloc were 0.6% lower than in the previous year, confirming Eurostat's earlier flash estimate.
Meanwhile, the European Commission admitted that a list of economic reforms submitted by Athens "is sufficiently comprehensive to be a valid starting point". The Greek government submitted its plan on how to overhaul the nation's economy earlier on Tuesday. The new Greek government pledged to take a disciplined approach to budgets, spending and tax collection. The Eurogroup said it agreed to start national procedures, which include parliamentary votes in several countries to ensure the final approval of the deal. The European Central Bank also approved Greece's four-month bailout extension, but expressed concerns over lack of details in Greece's reform plan.
Mario Draghi to speak in Brussels, Janet Yellen to testify in Congress for second day
Today the ECB President, Mario Draghi, will testify on the ECB Annual Report 2013 in Brussels before the European Parliament. In the meantime, the same job will be done by the Federal Reserve Chairwoman Janet Yellen as she will speak before the US Congress's House Financial Services Committee. Both heads of world's two major central banks are usually expected to give some guidance on future of monetary policy decisions; therefore, sensitivity of EUR/USD may well be increased. Additional volatility could be introduced by the US New Home Sales report, which is expected to show weaker sales (470K) than in December (481K).EUR/USD to respect down-trend at 1.14
The long-term outlook for the EUR/USD currency pair is remaining bearish. On January 22, the ECB has made a long-awaited decision to expand its asset purchases 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 may take place, but their impact and size are not expected to be appropriate for the common currency to commence a stable recovery in the long-run. Moreover, some market participants suggest it may fall further and even trade towards the parity in course of this year.Daily chart
While there is still some short-term upside potential for EUR/USD, the currency pair is likely to be capped by the falling trend-line and 20-day SMA at 1.14. At the same time, most of the technical studies are pointing south. Accordingly, the overall outlook for the Euro is bearish, though the currency needs to breach support at 1.13 to confirm its intentions to go lower, namely to the January low at 1.10. Alternatively, if 1.14 is violated, it will expose supply at 1.15.
Hourly chart
EUR/USD sentiment remains below 50%
OANDA traders also seem to be undecided with respect to the future of EUR/USD, being that 45% of open positions are long and 55% are short. As for the SAXO Bank traders, they are even less optimistic regarding the ability of the Euro to appreciate versus the US Dollar, considering that 58% of them are currently holding short positions.
Spreads (avg,pip) / Trading volume / Volatility
Community members are Euro-bears
Stix, one of the few Dollar-bulls, notes presence of tough resistance near 1.142, and he explains decreased volatility with the general bias being long. A proponent of a bearish outlook, WallStreet6, argues that "the Euro is under pressure amid the unresolved situation with Greece and the economic situation in the Euro zone". He also sees Mario Draghi's speech today as a potential "catalyst for bearish sentiment".
Concerning another survey that asks participants regarding their three-month views, 61% of traders expect the exchange rate to be below 1.14 on May 25. According to the traders, the most likely destinations for EUR/USD are 1.12-1.10 and 1.10-1.08 intervals, both of which collected 13% of all votes.