EUR/USD to retest 1.14 after failure yesterday

Source: Dukascopy Bank SA
Pending orders held by bulls fell from 44% to 42%
  • Long open positions are in minority at 49%
  • Bullish near term target is placed at Aug 24 closing level of 1.1580
  • Short traders are aiming at 1.14, second testing expected soon
  • Economic events to watch in the next 24 hours: US Durable Goods Orders (Jul) and Crude Oil Inventories (Aug 21), FOMC Member Dudley Speaks

  • © Dukascopy Bank SA
    The Euro traded in a mixed environment on Tuesday. EUR/AUD surged the most by 0.81%, even though there were no influential fundamentals from Australia, while oil prices have finally showed some rebound yesterday. On the side of losers, EUR/JPY lost 0.5% amid the safe-haven status of the Yen, which continued to benefit from somewhat uplifted market volatility across the world. Meanwhile, EUR/USD slumped for the first time in five days by 0.2% on a daily basis.

    German business morale improved more than expected in August as companies remained confident the Euro zone's number one economy is resilient enough to withstand China's slowdown. The Ifo institute's business climate index inched higher to 108.3 this month, up from 108 in July and overshooting the median estimate for a decrease to 107.6. In its August monthly bulletin the Bundesbank said that Germany is set for "solid" growth in the remainder of the year. Robust domestic spending, supported by record-low unemployment and borrowing costs, could provide a shield against weakness in China, German third-biggest trading partner. The Ifo's Current Assessment sub-survey, indicating current conditions in the German economy, booked 114.8 points, compared with the previous month's figure of 113.9. At the same time, the Expectations Index, reflecting companies' projections for the next six months, slid to 102.2, from 102.3.

    The Euro zone's biggest economy grew 0.4% in the second quarter, following the 0.3% expansion in the three months through March. The annual gauge on a non-seasonally adjusted basis showed 1.6% growth, after the first quarter saw a revised 1.2% gain. German overseas sales increased 2.2% in the three months through June, while private consumption gained 0.2%, and capital investment contracted 0.4%.

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    Upcoming fundamentals: US durable goods orders to show mixed numbers in July



    Orders for durable goods in the US are estimated to add 0.3% in July on the core basis, while falling 0.4% in terms of the headline reading. Therefore, markets assume the indicator will slow down considerably from figures showed in June. Meanwhile, the President of the Federal Reserve Bank of New York William Dudley is expected to hold a press conference today at 14:00 GMT and discuss the local and regional economy. The New York Fed is the most powerful among 12 Federal Reserve banks across the US, which raises additional attention to this event in the context of upcoming FOMC meeting in September.


    EUR/USD to retest 1.14 after failure yesterday

    Bears gained strong momentum on Tuesday, as EUR/USD attempted to cross several 2015 highs and close below the 1.14 mark. However, negative sentiment waned towards the end of trading and the cross came back above 1.1550. Still, the correction appears to be an event with a very high probability at the moment. If the pair fails at an immediate resistance represented by the May high at 1.1466, the next demand should be provided by Jun high at 1.1437 and monthly R2 at 1.1409. Despite that, daily technical indicators are bullish with respect to the common currency.

    Daily chart
    © Dukascopy Bank SA

    In the one-hour chart we observe that the Euro was rallying by Tuesday evening, even despite initial losses versus the Buck. We should not rule out the same scenario to take place today, but the overall scenario still prefers a correction of the pair.

    Hourly chart
    © Dukascopy Bank SA

    SWFX sentiment stays around 50%, pending orders largely unchanged

    Sentiment towards EUR/USD among SWFX market participants has been quite stable this week, while yesterday the share of bulls was down just one percentage point from 50% to 49%. Alongside, the portion of long pending orders in 100-pip range from the spot price decreased from 44% to 42% in the past 24 hours.

    Meanwhile, bullish positions at OANDA account for just 36.69% at the moment, while SAXO Bank market participants are also remaining strongly pessimistic towards the common currency, as the portion of longs takes up only 35% (-6%) of all open trades by Wednesday morning.













    Spreads (avg,pip) / Trading volume / Volatility




    Community members expect Euro to continue rallying this week

    © Dukascopy Bank SA

    As volatility in the equity markets remains uplifted, traders are moving away from the Greenback as Fed meeting approaches. As a result, the advantage of bullish votes increased even more over the past five trading days, up from 63% to almost 73%. Market participants also see the pair higher by Friday of this week, with the mean forecast being placed at 1.1450.


    A proponent of a near-term growth, RacerX, suggests that "with increasing skepticism about the Federal Reserve raising interest rates in the middle of next month and the unexpected devaluation of the Yuan, the Euro is looking increasingly attractive."

    Average forecast says EUR/USD will trade at 1.10 by November

    Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Jul 26 and Aug 26 expect, on average, to see the currency pair around 1.10 by the end of November. Though the majority of participants, namely 55% of them, believe the exchange rate will be strongly below this mark in ninety days, with 32% alone seeing it below 1.06. Alongside, 22% 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

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