EUR/USD undecided after strong Friday moves

Source: Dukascopy Bank SA
  • Traders have mixed opinions with respect to pair's short term perspectives
  • Pending orders are set to sell the Euro in the vast majority of cases (66%)
  • Pair is likely to trade flat until Wednesday; bulls to focus on 1.0519 in the mid-term
  • Daily technical indicators are undecided for second day in a row
  • Economic events to watch in the next 24 hours: French and Italian Industrial Output (Sep); US Import and Export Prices (Oct), Wholesale Inventories (Sep); ECOFIN Meetings; FOMC Member Evans Speaks

© Dukascopy Bank SA
The Euro traded in a mixed environment during the first working day of this week, but no sharp changes were registered amid considerable lack of any drivers around the world. EUR/GBP hovered the most to the downside by 0.34%, being that Sterling strengthened on the back of UK Prime Minister David Cameron's speech to the Confederation of British Industry on Monday. He stressed an importance of reforming the European Union before starting the process of renegotiating Britain's relationship with the EU. Meanwhile, the Australian Dollar slid by 0.25% against the Euro amid disappointing inflation data from China. It showed the CPI falling down to 1.3% in October from 1.6% in September. Analysts had estimated the reading of 1.5% last month.

German trade surplus increased in September, as both exports and imports rose in the reported month, according to Destatis. Monthly exports surged 2.6% to 105.9 billion euros, following a 5.2% plunge in August. Outbound shipments to the European Union soared 7.7%. In the nine months through September, German exports grew by 7.0% year-on-ear to total almost 896 billion euros. At the same time imports rose 3.6% in September after dropping 3.2% a month earlier. As a result, the nation's trade surplus rose to 22.9 billion euros, compared with the 15.4 billion recorded in the preceding month.

Meanwhile, a separate report showed Euro zone investor confidence improved more than expected in November. The investor confidence index climbed to the highest level in three months of 15.1 in the reported month, up from 11.7 in October. It was also above the expected result of 12.7. The current conditions index improved to 16 from 13 in the preceding month. Likewise, the expectations index increased to 14.3 in November from 10.5 in October. Moreover, the investor sentiment index for Germany also strengthened in November, to 20.1 from 17.8 a month earlier.

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Upcoming fundamentals: ECOFIN meeting in Brussels; manufacturing data from France, Italy



Following the Eurogroup meeting of 19 Euro zone countries' finance ministers, on Tuesday 28 finance chiefs from all countries of the European Union will meet together in Brussels. Main topics of discussion include the legal implementation of the banking union in Europe and debate on the single resolution mechanism. The latter was created, in order to ensure resolution to failing banks in the EU with minimal costs to taxpayers and real economy. Among fundamentals, French and Italian industrial production statistics is due at 7:45 and 9:00 GMT, respectively. Both indicators are expected to show an advance for the month of September, but Italy's growth is estimated to be somewhat higher in percentage terms.


EUR/USD's gains capped by monthly S1 at 1.0768

On Monday the most traded FX cross has tried to recover Friday losses, but it failed to come back at least above 1.0750. In addition to that, important bearish support was provided by the monthly S1 at 1.0768. We do not expect a rally to prolong any further in the medium term, while stronger US Dollar will weigh on this currency pair. In the near term bearish pressure is also likely to remain limited, owing to lack of fundamental drivers on Tuesday. Bears are focused on Apr low at 1.0519, followed by March low at 1.0461.

Daily chart
© Dukascopy Bank SA

EUR/USD may keep trading in limbo in the next few days, judging from the one-hour chart for this currency pair. A sell-off can potentially extend down to 1.06. However, the 200-hour SMA at 1.0908 is not hurrying to slump in the direction of the spot price, meaning downward pressure will be moderate.

Hourly chart
© Dukascopy Bank SA

Bulls and bears are holding equal number of positions

Along with our neutral expectation for the EUR/USD cross, SWFX market participants also have a mixed opinion on this matter. In the morning on Tuesday bulls and bears are holding 50% of all trades, down from the 52%/48% distribution seen 24 hours ago. Meanwhile, the longs continue losing ground in terms of the total number of pending orders in 100-pip range from the spot price. This indicator tumbled from 44% to 34% on a daily basis.

Nevertheless, bullish views are still supported by OANDA clients as 51.8% (53.3% yesterday) of them are keeping long open positions on the Euro versus US Dollar. However, SAXO Bank traders are unwilling to go long, while bears preserve an advantage of 57% against a bullish share of 44%.













Spreads (avg,pip) / Trading volume / Volatility



Average forecast says EUR/USD will trade at 1.12 by February 2016

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Oct 10 and Nov 10 expect, on average, to see the currency pair around 1.12 by the end of next year's February. Majority of participants, namely 52% of them, believe the exchange rate will be generally below this mark in ninety days, with 30% alone seeing it below 1.08. Alongside, only 19% of those surveyed reckon the price will trade in the range between 1.12 and 1.18 by the end of February 2016.

© Dukascopy Bank SA

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