- Bulls gained 56% of SWFX market, up from 55% yesterday
- Broad range (100-pip) pending orders are still set to sell the Euro in 65% of all cases
- US inflation statistics estimated to have material influence on EUR/USD today
- Daily technical indicators are scattered; no unanimity is observed anymore
- Economic events to watch in the next 24 hours: Italian Trade Balance (Sep); German and Euro zone ZEW Economic Sentiment (Nov); US CPI (Oct) and Industrial Production (Oct)
Inflation returned to the Euro bloc last month, a revised data by the EU's statistics agency showed, led by price increases for fruit and vegetables. According to Eurostat, consumer prices in the currency area edged up 0.1% in October from a year earlier. Excluding volatile components of food and energy, core inflation climbed 1.0% on year, following a 0.8% gain in September. Measured on a monthly basis consumer prices climbed 0.2% in the reported month. The modest upward revision is unlikely to have a major impact on the view of ECB policy makers, when they review the central bank's stimulus programme next month. The ECB strives to ensure an inflation rate of just under 2%. However, energy prices kept inflation from rising further, as the cost declined 8.5% on an annual basis in October, following a 8.9% decrease in the preceding month.
Using the Harmonized Index of Consumer Prices, the barometer used by the ECB to compare price developments in countries across the bloc, the annual inflation rate in Euro zone added 1.1%. In September, it gave up 0.2%, recording the first drop in eight months. Analysts assume that the attacks in Paris could weigh on inflation if it leads to a near-term impact on economic activity across the Euro zone.
Upcoming fundamentals: Will German ZEW sentiment disappoint again?
For the past nine months the German ZEW economic sentiment indicator has constantly showed worse than expected numbers. All in all, the index has been falling every month since March of this year, dropping from 54.8 points that month to just 1.9 points in October on the back of global economic weakness and little optimism over recovery in the Euro area. Nevertheless, analysts estimate ZEW to grow to 6.7 points in November when it is released at 10:00 GMT. Meanwhile, Italian trade balance data is due at 9:00 GMT and the balance is forecasted to remain in the surplus for a thirty first month in a row.
EUR/USD to set fresh eight-month lows
EUR/USD traded on the downside yesterday, owing to uncertainty over European economic outlook and despite positive inflation data. The newest eight-month low at 1.0650 has already been touched Tuesday morning. We are now fully focusing on the April low at 1.0519, the closest major support which is reinforced by the monthly S2, weekly S3 and lower Bollinger band from above. Intermediate demand is offered by the weekly S2 at 1.0602. Trading volume remains at the highest level in three weeks, meaning volatility of the market may persist in the nearest future.Daily chart
The observed cross keeps hovering within the boundaries of a bearish channel in the one-hour chart. Losses seem to be extending lower to the 1.05 mark in the next few days, if the current downward trend remains in place. 200-hour SMA is merging with the upper trend-line for the moment, representing extra bearish risk for EUR/USD.
Hourly chart
Euro-positive market sentiment picks up further
Meantime, sentiment among OANDA clients has been largely flat during Monday as bulls are holding 52.3% of all positions opened there. SAXO Bank traders are finally nearing the break-even point when bulls and bears are going to keep the equal number of open trades. Nevertheless, the bears are still enjoying a slight majority in the SAXO Bank market, namely 50.59%.