- 51% of all SWFX open positions are now bullish
- Pending orders in 100-pip range show neutral distribution between bulls and bears
- Decline below monthly S1 at 1.1022 exposes the next demand at 1.0879/68
- Daily technical indicators are giving an aggregate bullish signal again
- Economic events to watch in the next 24 hours: German IFO Business Climate (Sep); Bundesbank Monthly Report; US New Home Sales (Sep) and Dallas Fed Manufacturing Business Index (Oct)
Activity in the Euro zone's manufacturing sector grew at the same pace as in September, with mixed data coming from the region's biggest economies, Germany and France. The flash manufacturing PMI for the Euro bloc was at 52.0 points in October, remaining unchanged from the preceding month. At the same time, the region's services PMI climbed to 54.2 points this month, compared with 53.7 in September and analysts' forecasts for a decline to 53.5. In Germany, the Euro zone number one economy, the manufacturing sector activity declined to the lowest level in five months of 51.6. Yet, the reading remained in green territory. Meanwhile, the services sector improved in the reported month, with the corresponding reading coming in at 55.2 points. In France, the bloc's second biggest economy, both sectors remained in expansion territory, with the flash manufacturing PMI edging up further to 50.7 points and the flash services PMI hitting 52.3 points after September's 51.9.
US manufacturing activity unexpectedly rose to the highest level in five month in October, suggesting possible improvement in the sector, which is suffering from a strong US Dollar and sluggish global demand. According to the data provider Markit, the US flash purchasing managers' index climbed to 54.0 from 53.1 last month, which was close to the lowest level in two years. The robust start to the final quarter of the year indicates the world's number one economy may be gathering speed again after slowing in the three months through September, for which the PMI surveys estimated annualized GDP growth of 2.2%. The faster growth of export sales is particularly good news and will help to fan fears that the US economy is being hurt by the stronger Dollar and slower growth in China.
Upcoming fundamentals: German IFO data in sight as markets foresee weakness
The 19-nation currency is likely to be driven by German IFO business survey (9:00 GMT) numbers on Monday. Analysts expect the indicator, which tracks confidence among 7,000 country's businesses, to fall from 108.5 points in August to 108.1 points last month. On the other hand, the index beat economists' estimates for the three past months in a row. Meanwhile, US new home sales are due at 14:00 GMT today, with the reading estimated to be published at 546,000 annualized sales in September, down from 552,000 in the preceding month.
EUR/USD breached 2015 trend-line
EUR/USD prolonged a sell-off below the major upward-sloping 2015 trend-line. On top of that, the monthly S1 at 1.1022 was penetrated as well, but the cross managed to remain above the important psychological level of 1.10. The monthly S2, which is strengthened by the weekly S1, became exposed around the 1.0870 mark. We would allow for this level to limit first attempts to slump even lower. Rallies are likely to be capped by 200-day SMA/weekly PP at 1.1119. The market seems to be refocusing considerably to the downside at the moment.Daily chart
Bearish expectations are supported by the one-hour chart, where the price of EUR/USD is consolidating below the trend-line and September low. Additionally, there is almost a 300-pip gap between the spot and 200-hour SMA, currently at 1.1308, which implies significant negative risks for the pair.
Hourly chart
SWFX bullish trades rise to 52%, pending orders neutral
The majority (55%) of SAXO Bank clients still expect EUR/USD to lose value, but the portion of short positions dipped from 69% seen last Thursday and 56% on Friday. However, OANDA traders continue to be bullish for the second consecutive trading day, with long trades accounting for 56% of all open positions.