- 60% of orders are set to sell
- Sentiment is neutral
- July low at 1.0810 is the target
- Ceiling is still seen at 1.11
- Upcoming events: German Retail Sales (Jun), Euro zone CPI Flash Estimate, Unemployment Rate (Jun), Chicago PMI (Jul), Revised UoM Consumer Sentiment (Jul), US Employment Cost Index
The Spanish economy accelerated for the eighth consecutive quarter, after it recovered from the recession in the third quarter of 2013. Spain's GDP in the second quarter rose at 1.0% quarter-over-quarter, in line with economist forecasts. On an annual basis, GDP advanced 3.1%, below analysts' expectation of 3.2%. Positive preliminary figure indicated that the economy has been sustaining its growth momentum seen in the beginning of the year, when GDP expanded 0.9%. Earlier in July, Spain's central bank revised its 2015 GDP forecast to 3.3%, while for 2016 to 3%. Despite the strong growth, several economists believe that this highly indebted economy might have peaked its growth rate, as household consumption is difficult to sustain over long period of time. Moreover, July flash CPI was flat at 0.0%, down from 0.1% in June. Sliding fuel prices increase disposable income, therefore boosting household consumption and helping Spain's economic recovery.
According to Andres Fuentes Hutfilter, a senior economist with OECD, the risks from the Greek crisis to the German economy are "limited". The analyst noted that the German stock market did notice the news from Greece, but did not react in "a very dramatic way". However, the economist highlighted that the recent events had an impact on the economic prospects and stability of the whole Euro area, which in turn is important for Germany. Hutfilter expects German economy to grow 1.8% this year.
In the meantime, Germany's unemployed data revealed that the number of unemployed rose by 9,000 in July to 2.8 million, the biggest monthly increase since March of 2014. However, the unemployment rate stayed in line with analysts' expectation at 6.4%, the lowest level since 1990. It was the first time in nine months when the number of unemployed surged in Europe's largest economy, as there were fewer jobs available. The rise in unemployment could be attributed to young people looking for jobs after finishing their study or training programs.
Barrage of Euro zone data from 6 to 9 a.m. GMT
Today we have very few significant releases from both sides, but their quantity may compensate for the lack of importance. German retail sales have already disappointed, and given the discrepancy between the forecasts and the actual figure, there is little chance the remaining releases, such as the inflation estimate and the unemployment rate, are going to restore the status quo.
EUR/USD takes a break at 1.0930
Bears failed to push though the weekly PP yesterday, but this does not change the bearish outlook on the Euro. The ceiling is still at 1.11, while the July low at 1.0810 is the target, meaning any rallies will be of a correctional nature The negative bias is reinforced by the daily and monthly technicals. Even if the resistance trend-line is broken, the bears will have a good opportunity to recuperate at 1.1240 with the help of the 200-day SMA.Daily chart
In the hourly chart EUR/USD is attempting to develop a bullish correction, but the latest fundamentals are unlikely to let the price to ascend above the 200-hour SMA at 1.0980 in the nearest future. Despite the low volatility at the end and at the beginning of the week, on Monday we may already see a re-test of the yesterday's lows.
Hourly chart
SWFX sentiment turns neutral; elsewhere bears have an advantage
The levels of long positions at OANDA and SAXO Bank are now aligned. Both brokers report that 39% of positions held by their traders in EUR/USD are long, which is notably below 49% reported by the SWFX market.
Spreads (avg,pip) / Trading volume / Volatility
Community members expect Euro to weaken by the end of the week
Participants of the weekly poll among Dukascopy Community members have a strong negative bias towards EUR/USD. The average forecast lies between 1.06 and 1.05, although the most popular interval among the surveyed was 1.08-1.07 with more than 17% of the votes.
A proponent of a near-term rally, Tommaso, ponders that "the elusive parity between the Euro and the US Dollar could be the August-September target for the pair; but this "race" still requires a better position". He thinks "this "position" can be achieved during the July 26th - 31st week, with a correction at the 1.1000 level". One of his opponents, a community member with a nickname Csongor_George_Pal, expects the Fed to raise the federal funds rate to 0.35%, which in turn will negatively affect EUR/USD.
Judging by the average forecast, 1.1002, survey participants do not expect the Euro to move in either direction during the next three months. In reality, there are significantly more bears (57%) than bulls (43%) because the bears gave somewhat less extreme forecasts than the bulls. Meanwhile, the most popular answer, which collected 20% of all the votes, was a price interval between 1.04 and 1.02.