- A notable decline in the percentage of sell orders, from 68 to 52%
- Still no real difference between the amounts of bulls (49%) and bears (51%)
- The closest significant resistance is the down-trend at 1.14
- Key support is at 1.13
- Upcoming events: US (Core) CPI (Jan), Unemployment Claims, (Core) Durable Goods Orders (Jan), FOMC Member Lockhart Speech
Greece's Finance Minister Yanis Varoufakis sees the country returning to the financial markets as soon as it succeeds in debt restructuring, investment and sustains primary budget surpluses. Greece has been excluded from international financial markets since 2010, with the exception of two bond issues in 2014 made by Antonis Samaras' government. Also, Athens is expected to receive its third rescue package worth 20 billion euros this summer. Meanwhile, Riksbank, Sweden's central bank, said it is prepared to cut interest rates further and increase bond purchases in the near-term, if inflation expectations continue to stay low and shocks coming from overseas remain strong. Inflation has been declining below the Riksbank's goal for several years. In January, the consumer price index dropped 0.2% on the year and 1.1% on the month.
In a speech before the European Parliament, the ECB President Mario Draghi warned that the future of the currency bloc was at risk. Draghi outlined the need for member states to give up some independence, harmonize their economies and create stronger Pan-European government institutions to ensure long-term success of the monetary union. Draghi has reiterated previously his view that Euro zone governments should do more to improve their economic performance.
Decline in CPI to accelerate
While there are a few low and medium-impact European data releases planned in the morning, the main risk events for EUR/USD are scheduled at 13:30 GMT. The value of US Durable Goods Orders is expected to increase by 1.7% after a 3.3% contraction a month earlier. However, the price level in the United States is estimated to decline at a higher pace than before, 0.6% in January after 0.4% in December.EUR/USD hesitant ahead of 1.14
The long-term outlook for the EUR/USD currency pair remains bearish. On January 22, the ECB 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.In the meantime, Naeem Aslam, chief market analyst at Ava Trade, considers the recent comments of Janet Yellen "pretty bearish", which contributed to the volatility of EUR/USD. At the same time, the analyst expects the Chair of the Fed to change her view after the labour report next month, which in turn is going to put pressure on the Euro-Dollar. According to Naeem, the exchange rate is going to be more or less stable in the near term, staying around 1.14, but afterwards the price will decline. First, down to 1.11 during the next three months, then after three more months it should bottom out at 1.08 and commence a recovery to 1.10, as the markets will start to feel the effect of the quantitative easing introduced by the ECB.
Daily chart
Despite immediate resistance at 1.1368, represented by the weekly PP, there is still some room left for the Euro to appreciate in the short term. The gains, however, should be capped at 1.14, where supply is implied by the multi-week trend-line. Meanwhile, 1.13 is the key support level, which has been keeping the exchange rate afloat since the beginning of February. As suggested by the technical studies, this demand area should eventually give in.
Hourly chart
Sentiment tilts to the bearish side
Meanwhile, the sentiment among the OANDA and SAXO Bank traders with respect to the single European currency is poor, as evidenced by a decrease in the share of long positions. The percentage of bullish market participants at the Canadian-based broker fell from 45 to 43%. The portion of bulls at the Denmark-based broker stays decreased, at 41% (42% yesterday).
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 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".
Concerning another survey that asks participants regarding their three-month view, 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.