- 60% of pending orders are set to sell
- Long open positions remain below 50%
- Jul high at 1.1216 in focus of bullish attention
- Short traders to rely on impetus from 200-day SMA
- Economic events to watch in the next 24 hours: French GDP (Q2), German GDP (Q2), Italian GDP (Q2), Euro zone GDP (Q2) and CPI (Jul), US PPI (Jul) and Industrial Production (Jul)
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The European Central Bank stands ready to alter its QE programme to combat unusually "low inflation" and "disappointing economic growth" in the Euro zone. ECB officials voiced fears that while inflation in the Euro area seems to have bottomed out, the region's recovery remains under threat by the Greek crisis and turmoil in emerging markets.
Consumer inflation in Germany, the Euro zone's powerhouse, remained weak in July, adding to signs that the European Central Bank's QE programme has yet to have its intended effect on German economy. Consumer prices rose 0.2% on month in July, in line with preliminary estimates, and compared with the 0.1% decline in June. In annual terms, German inflation inched up 0.2% in July. The annual CPI print has been in positive territory for six consecutive months, after it plunged in January to the lowest level since July 2009. When measured according to common European standards, or HICP, it climbed 0.3% in the reported month.
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Upcoming fundamentals: Euro area GDP data in focus on Friday
Even though the majority of GDP releases will already be announced by the time this report is published, it is still worth mentioning expectations among market participants. The main view remains clear, as four biggest economies of the Euro zone are forecasted to grow altogether for the first time since Euro zone debt-crisis in 2012. Meanwhile, inflation in the single currency area is forecasted to drop by 0.6% on a monthly basis in July, while year-on-year the CPI is expected to stay positive at 0.2% on a headline basis. The latter indicator is due today by 9:00 GMT.
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Thursday ends with no change for EUR/USD
EUR/USD is faltering below the 200-day SMA for a third consecutive day on Friday, while yesterday the pair failed to penetrate this level. From another side, Thursday's bearish push downwards was immediately capped by support area at 1.1080 (100 and 55-day SMAs, weekly R2). The pair may allow for a rise above the Jul high at 1.1216 next week, but longer-term rally is still unlikely. Moreover, as long as it remains below the resistance zone of 1.1160-1.12, our outlook with respect to the Euro is fairly negative.Daily chart
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In the one-hour chart we observe a stabilisation above the two-month downtrend line, which somewhat overshadows our bearish expectations from the daily chart's perspective. However, we note that Jul high and 23.6% Fibonacci retracement are still in place as major resistances. On the contrary, some support can be provided by 200-hour SMA, which is currently reversing upwards around the 1.10 mark.
Hourly chart
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SWFX sentiment bearish, long pending swing between gains and losses
Meanwhile, bullish positions at OANDA account for just 35.32% at the moment, while SAXO Bank market participants are also remaining strongly pessimistic towards the common currency, as the share of longs takes up just 26% on Friday.
Spreads (avg,pip) / Trading volume / Volatility
Community members expect Euro to weaken by the end of the week
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Only a minority (27%) of participants in the weekly quiz expect the bullish movement for the EUR/USD currency pair. The median forecast for Friday of this week is located around the 1.08 mark.
Read More: Community Forecasts
A proponent of a near-term decline, Lukas, suggests that in the long-term "the EUR/USD pair could reach 0.9 level but it still hard to predict.". On the other hand, al_dcdemo is bullish on the Euro, as he thinks that EUR/USD "will remain at current levels at least until the end of the summer." Also, he supposes that "we will see a correction to 1.20 before any further decline."
Average forecast says EUR/USD will trade at 1.09 by November
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Jul 14 and Aug 14 expect, on average, to see the currency pair around 1.09 by the end of November. Though the majority of participants, namely 60% of them, believe the exchange rate will be strongly below 1.10 in ninety days, with 36% alone seeing it below 1.06. Alongside, 20% of those surveyed reckon the price will trade in the range between 1.10 and 1.16 by the end of November of this year. © Dukascopy Bank SA