EUR/USD erodes recent losses

Source: Dukascopy Bank SA
  • Market sentiment is moderately bullish (54%) on Thursday
  • Share of long pending orders in 100-pip range plunged from 49% to 36%
  • Bulls to focus on breaching the nearest resistance at 1.1187/96
  • Next supply is placed at 1.1260 (monthly PP; 50% retracement)
  • Economic events to watch in the next 24 hours: German IFO Business Climate (Sep); Italian Retail Sales (Jul); ECB Targeted LTRO; US Durable Goods Orders (Aug), Unemployment Claims (Sep 18) and New Home Sales (Aug); Fed Chair Yellen Speaks

© Dukascopy Bank SA
On Wednesday the Euro skyrocketed versus all major currencies after three days of losses or sluggish growth. Positive changes were in place due to comments from the ECB President Mario Draghi. Analysts suggest he used less dovish language when testifying in the European Parliament yesterday. A Euro-bullish influence was quite clear: EUR/AUD climbed by 1.8% and EUR/GBP added 1.4%. The threshold of 1% was also unexpectedly surpassed by the EUR/CHF cross, which is usually considered to be a low-volatility cross.

Manufacturing activity in Germany, the Euro zone's biggest economy, decreased the pace of growth for the month of September. Preliminary PMI indicator for the production sector of the economy came in at 52.5 points, down from 53.3 points in August. Moreover, it registered a miss from an average expectation, which amounted to 52.8 points. Despite that, activity remains in the expansion territory, being that the reading stays above the 50-point threshold, which divides expansion from contraction. In addition to that, activity of the services industry continued to rise in September, but also at a slower than forecasted pace. Services PMI slid to 54.3 points this month, down from positively revised 54.9 points in August. At the same time, both readings above 50 points indicate to solid economic growth in the third quarter of this year. GDP advance should be supported by healthy labour market and increasing personal consumption.

Meanwhile, in France both manufacturing and services PMI have surprisingly surged in September. Production sector in growing again as the PMI rose from 48.3 to 50.4 points, well ahead of any estimates. Services industry's activity is currently staying at 51.2 points, up from 50.6 points on a monthly basis.

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Upcoming fundamentals: Germany's business confidence to fall amid Chinese fears



The business climate index for Germany, calculated by the Ifo Institute for Economic Research, is likely to decline in September amid fears that China's economic slowdown may negatively affect recovery in the Euro zone's largest economy. When released at 8:00 GMT, economists assume the index will decline from 108.3 points in August to 107.8 points this month. Meanwhile, at 9:15 GMT the European Central Bank will announce the amount of money lent to banks under the Targeted Long-term Refinancing Operations programme. Analysts foresee it picking up by 50.3 billion euros. The programme began in September 2014 and is intended to expand the ECB balance sheet by one trillion euros.


EUR/USD erodes recent losses

EUR/USD started to erase losses that occurred during the previous three trading days. Yesterday it bounced back to close the session at 1.1185, just below the weekly S1 and 200-day SMA. If bulls push the pair through these resistances, it will be in a good position to extend gains up to the 1.1260 mark, which is guarded by the monthly pivot point and 50% Fibonacci retracement of the Jul-Aug uptrend. Losses are not off the table either as bears expect to returning EUR/USD back below 1.1120 (55-day SMA) in the short term.

Daily chart
© Dukascopy Bank SA

From the point of view of the one-hour chart, EUR/USD's outlook remains fairly negative at the moment. The pair is still hovering well below the 200-hour SMA, currently at 1.1270. We see the 19-nation currency hovering below this supply in the next 24 hours, keeping in mind the fact that it is reinforced by the 50% retracement.

Hourly chart
© Dukascopy Bank SA

Bulls hold gains as their share is stable at 54%

Market sentiment with respect to the EUR/USD currency pair remains positive for the second consecutive day as the share of bulls is unchanged at 54% on a daily basis. On the other hand, the share of bullish pending orders in 100-pip range from the current market price crashed by 13 percentage points yesterday, down from 49% to just 36%.

Meanwhile, bullish open positions (50.67%) at OANDA surged further and finally outpaced the number of bears in the market. Nonetheless, SAXO Bank traders are still remaining largely pessimistic with respect to the common currency as their portion of the longs slumped from 39% to 35% in the past 24 hours.












Spreads (avg,pip) / Trading volume / Volatility




Community members forecast the Euro to grow against the US Dollar this week

© Dukascopy Bank SA

On a weekly basis, the sentiment among Dukascopy Community members on this currency pair remains the same, as still only 42% of traders predict the Euro to decline.


Among traders, csan86 says that "this pair is still moving in a descending triangle. It tried to break out from this pattern on Thursday, but the price was changed by the 1.1450 resistance level again." He suggests that "this pair is still bullish" and he expects "an another breakout attempt this week."

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 24 and Sep 24 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 40% alone seeing it below 1.10. Alongside, only 25% 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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