EUR/USD loses steam, drops below 1.13

Source: Dukascopy Bank SA
  • Pending orders held by bulls are down ten percentage points to 45%
  • Long open positions have rebounded from 42% to 44%
  • Strongest resistance is placed at 1.1409/66
  • Short traders to aim at 1.1130/12 demand cluster
  • Economic events to watch in the next 72 hours: Spanish Retail Sales (Jul) and HICP (Aug); Italian Business Confidence (Aug); Greek Revised GDP (Q2); Euro zone Business Climate (Aug); German CPI (Aug); US Personal Spending (Jul), Goods Trade Balance (Jul) and Consumer Sentiment (Aug); Jackson Hole Symposium (Day 2-3); Fed Stanley Fischer Speech

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Single European currency continued to under-perform the majority of its peers on Thursday as market volatility decreased further and equity markets returned to sustainable recovery. The only positive performer was EUR/CHF cross, which gained 0.6% as demand for safe-haven Franc declined considerably. From another side of the coin, commodity currencies prolonged their rally yesterday amid recovering oil prices worldwide. Meanwhile, the US Dollar surged 0.8% versus the Euro due to better-than-projected US Prelim GDP figures.

Business morale in France rose to the highest level in four years amid low oil prices and a weaker Euro. Business confidence index climbed to 100 in August, the highest reading since 2011, according to INSEE. Analysts, however, had predicted the gauge to remain at 99, the same level as in July. The improvement in the French business climate indicates the Euro zone's second biggest economy is recovering, even though economic data remain dismal. The French Finance Ministry and the International Monetary Fund expect that economic growth in 2015 will reach 1%, compared with an average of less than 0.5% in the previous three years.

Meanwhile, the Spanish economy managed to maintain momentum seen in the first quarter, as the nation's economic output rose further in the three months through June. According to the final GDP data, the Euro bloc's fourth largest economy grew 1.0% on quarter in the April-June period, after expanding 0.9% in the beginning of the year. The data marked the eighth straight quarter of continuous economic growth in Spain. When measured on an annual basis, the economy added 3.1%, compared to the first quarter's 2.7% increase. Analysts had expected confirmation of 3.1% GDP growth as estimated by preliminary figures.

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Upcoming fundamentals: Greek GDP in focus after Q2 surprising rise



The gross domestic product data from Greece is due at 9:00 GMT today, when the revised second-quarter numbers will be published. Earlier this month, the first estimate showed an unexpected 0.8% GDP gain for the period. However, it did not include the capital controls imposed on country's banks in July. In the meantime, both Euro area's business sentiment index and Spanish CPI are due at 9:00 and 7:00 GMT today, respectively, while German inflation should be announced by 12:00 GMT today.


EUR/USD loses steam, drops below 1.13

Support at 1.1295/62 failed to produce any bullish momentum for long traders on Thursday. As a result, the pair slumped below both of these technical levels to trade around 1.1240 by Friday morning, after testing the Jul high at 1.1216 earlier yesterday. Last month's high also guards the next support zone represented by 20-day SMA and monthly R1 at 1.12. A decline below them should trigger losses down to the main demand at 1.1130/12 (weekly S1; 100 and 200-day SMAs). From another side, any rally will meet a substantial resistance at 1.1409/66 (May/Jun highs).

Daily chart
© Dukascopy Bank SA

In the one-hour chart EUR/USD managed to confirm the bullish channel pattern, by crossing its lower trend-line. Moreover, probability of further losses increased significantly due to a dip below both 23.6% Fibonacci retracement of 2014-2015 downtrend and 200-hour SMA, currently at 1.1288.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment remains bearish, while pending orders are back below 50%

EUR/USD's sentiment among SWFX market participants regained just two percentage points from yesterday, as only 44% of all open positions are positive at the moment, up from 42% seen on Thursday morning. At the same time, the portion of long pending orders in 100-pip range from the spot price plummeted from 55% to 45% in the past 24 hours.

The share of bullish positions at OANDA is 42.40% at the moment, while SAXO Bank market participants are also remaining strongly pessimistic towards the common currency, with their portion of longs taking up only 36% of all open trades on Friday, August 28.













Spreads (avg,pip) / Trading volume / Volatility




Community members expect Euro to continue rallying this week

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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 28 and Aug 28 expect, on average, to see the currency pair around 1.10 by the end of November. Though the majority of participants, namely 52% of them, believe the exchange rate will be strongly below this mark in ninety days, with 29% alone seeing it below 1.06. Alongside, 24% 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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