- There are insignificantly more sell commands (55%) than there are buy ones
- Market remains net short the Euro
- Over the next few weeks the price will likely decline to 1.09
- Close above 1.1150 will imply a move towards the 200-day SMA
- Upcoming events: US CB Consumer Confidence, Flash Services PMI
Business confidence in Germany, the Euro zone's biggest economy, improved more than predicted in July as concerns over Greece have subsided, suggesting a solid growth in the German economy this year. According to the Ifo think-tank, the business climate index climbed to 108.0 this month, up from a revised 107.5 in June and compared with economists' median forecast of 107.5. The data is based on a monthly survey of around 7,000 companies in manufacturing, construction, wholesaling and retailing industries, which are asked about their assessment of the current situation and their business expectations for the next six months.
The German central bank said in its July monthly bulletin that "strong" rises in factory orders during April and May, especially from overseas, point to a revival in the German economy in coming months. The outlook may also be supported by the Euro area's deal to provide Greece with a third bailout, averting the country's default and potential exit from the single currency. Yet, there are risks to the German economy down the road, including longer-than-expected periods of weakness of the US and the Chinese economies, both of which are top German export destinations, and a possible new flare-up of the Greek crisis.
US Consumer Confidence to decide today's EUR/USD change
EUR/USD did not react as much to a positive surprise from the USA as it did from the Euro zone figures and therefore closed higher. Today, given the right conditions, namely improvement in the consumer confidence as reported by the Conference Board Inc., the US Dollar could win some of the yesterday's losses back, since there will be very few events directly affecting the Euro, but it could play out the other way around as well.
EUR/USD is bearish
Yesterday the pair has nearly reached the target level of 1.1150, but now there is very little hope the recovery is going to continue. The gains are expected to be capped by the falling resistance line and the 55-day SMA at 1.11. Over the next few weeks the price will likely decline through the nearby supports and test the emerging support line at 1.09. At the same time, a close above 1.1150 will imply a move towards the 200-day SMA at 1.1260.Daily chart
On the hourly chart we still have a reason to go long the Euro on dips, as support at 1.1040 is expected to hold. Regardless, being a bull is a risky enterprise, as we are approaching a long-term resistance line, which is highly unlikely to let any more price gains in the foreseeable future.
Hourly chart
Bulls remain in minority
OANDA and SAXO Bank traders are even less bullish than the participants of the SWFX marketplace. Around 39% of open position on EUR/USD at OANDA are long. The share of bulls at SAXO Bank is lower, it is 35%