EUR/USD declines after mixed US fundamentals

Source: Dukascopy Bank SA
  • Share of long pending orders in 100-pip range increased further from 54% to 60%
  • Market sentiment remains slightly bearish (53%)
  • Neutral outlook to prevail if the pair returns above 1.13
  • Bears to wait for US CPI data in order to attempt prolonging losses
  • Economic events to watch in the next 24 hours: Euro zone CPI (Aug); US CPI (Aug) and Crude Oil Inventories (Sep 11)

© Dukascopy Bank SA
The Euro traded in a mixed environment on Tuesday as changes were predominantly driven by factors influencing other currencies. EUR/CHF gained the most of 0.3% as risk appetite returned to the markets, equities surged across the board and therefore decreased the demand for the safe-haven Swiss Franc. EUR/GBP followed with a rise 0.2% after UK CPI numbers revealed a decline to zero in August of this year. On the side of losers, both EUR/NZD and EUR/CAD dipped the most by 0.4%.

Economic sentiment in Europe's powerhouse continued to deteriorate in September amid concerns over slowing demand in emerging economies, which dampens the economic outlook for Germany's export-oriented economy. According to the ZEW survey, the economic sentiment index for Germany fell to 12.1 points in September, down from the previous month when the reading stood at 25 points. However, the assessment of the current situation in Germany has improved slightly, increasing by 1.8 points to 67.5 points. At the same time, the sentiment concerning the economic development of the whole Euro zone has weakened, as the ZEW Indicator decreased by 14.3 points to a reading of 33.3 points.

Meanwhile, the recent employment figures from the Euro area revealed that recovery continued in the second quarter, though growth remains weak. Employment increased by 0.3% in the 19 countries sharing the Euro and by 0.2% in 28 countries of the Union in the April-June period. On an annual basis, the gauge added 0.8% in the Euro zone and 0.9% in the EU. Another positive release by the Eurostat showed that the trade surplus in the Euro area widened to 22.4 billion euros in July on rising exports and cheaper energy.

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Upcoming fundamentals: Euro area inflation to stay at 0.2% in August



Preliminary inflation numbers from the Euro zone showed prices rising by 0.2% in August, far below the 2% target of the European Central Bank. Today the final CPI data is due, but economists forecast the first estimate to be confirmed. Alongside, the similar scenario is suggested for the US annual consumer price index, which may stay unchanged at 0.2% in August, even though analysts estimate a rise from 1.8% to 1.9% on the core basis.


EUR/USD stuck in 1.13/1.1262 support zone

EUR/USD was sent downwards after somewhat positive US statistics, and the pair has finally managed to confirm the 1.13 mark. However, the Euro seems to be stuck in between some important technical levels, namely the 23.6% Fibonacci retracement at 1.1295 and weekly/monthly pivot points at 1.1274/62. Moreover, the latter are also followed by 20-day SMA, complicating the bearish case in the short-term. We still expect EUR/USD to hover without any major changes until tomorrow, when there is going to be the Fed rate decision. In addition, daily indicators are mixed at the moment.

Daily chart
© Dukascopy Bank SA

As expected, the pair failed to maintain its bullish trend for a long period of time as the trading in a sharp upward-slope bullish channel pattern implied considerable downward risks. Despite a slide below the Fibonacci retracement our outlook remains neutral as long as EUR/USD stays above the 200-hour SMA, currently at 1.1227.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment is bearish towards EUR/USD

EUR/USD's sentiment among SWFX market participants was unchanged yesterday as the total share of bulls holds at the 47% level. On the other hand, the portion of long pending orders in 100-pip range from the spot price continued to expand on Tuesday, therefore showing a rise from 54% to 60% by Wednesday morning.

Meanwhile, the total number of bullish positions at OANDA amounts to 41% at the moment, while SAXO Bank market participants are even more pessimistic with respect to the common currency as their portion of the longs takes up only 37% of all open trades.













Spreads (avg,pip) / Trading volume / Volatility




Community members forecast the Euro to rally against the US Dollar 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 53% to almost 63%. Market participants also see the pair higher by Friday of this week, with the mean forecast being placed at 1.127.


Among traders, Jignesh claims that "this week's main risky event is the Fed rate statement. The expectation is for a sell-off in the USD as the Fed is unlikely to raise rates, based on the current inflation outlook. Resistance comes in at previous highs around 1.16 - 1.17, which is a likely place for the pair to revert."

Average forecast says EUR/USD will trade at 1.13 by December

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Aug 16 and Sep 16 expect, on average, to see the currency pair around 1.13 by the end of December. Though the majority of participants, namely 55% of them, believe the exchange rate will be generally below the 1.14 mark in ninety days, with 38% alone seeing it below 1.10. Alongside, only 24% of those surveyed reckon the price will trade in the range between 1.14 and 1.20 by the end of December of this year.

© Dukascopy Bank SA

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