EUR/USD loses steam before FOMC minutes

Source: Dukascopy Bank SA
  • Bulls are holding 56% of SWFX market, no change on a daily basis
  • Broad range (100-pip) pending orders are still set to sell the Euro in 60% of all cases
  • FOMC meeting minutes to create extra market volatility on Wednesday
  • Daily technical indicators are scattered; three signals to buy/sell and two neutral signals
  • Economic events to watch in the next 24 hours: US Housing Starts and Building Approvals (Oct), EIA Crude Oil Inventories (Nov 13); FOMC Meeting Minutes

© Dukascopy Bank SA
Risk-averse sentiment and expectations over more ECB stimulus in December are pushing odds against the common European currency. Yesterday it slid against all but one G8 currency, by adding 0.08% only against the Swiss Franc. Japanese Yen and US Dollar, two classical safe-haven currencies, are building ground as they advanced by 0.2% and 0.4% versus the Euro, respectively. Commodity currencies strengthened even more by 0.5%-0.6%, even though oil prices are still depressed by worries over waning demand and oversupply in the market. Meanwhile, EUR/GBP dipped by 0.5% amid slightly better than estimated UK core annual inflation reading, which came in at 1.1% for October as analysts thought it would stay unchanged at 1%.

Business morale in Germany improved in November following seven successive monthly falls. The investor confidence index surged to 10.4 points, up from 1.9 points a month earlier, according to the ZEW economic institute. The current situation index, however, slid to 54.4 in November, down from October's 55.2. The high level of domestic consumption, the recent weakening of the Euro and the outgoing recovery in the US are likely to boost the robust development in the German economy. The current economic situation in German looks disappointing, as inflation remained below the targeted level and as the German economy was hit hard by a slowdown in emerging markets, the Volkswagen scandal, the migration crisis. The Euro zone's powerhouse grew 0.3% in the third quarter, following the 0.4% expansion in the preceding three-month period. Domestic consumption remained the main driver of the economy. At the same time Germany's inflation climbed 0.3% year-on-year in November, after a flat reading in the previous month.

Consumer price inflation in the UK remained in negative territory for the second month in a row in October, highlighting worries over deflationary pressures and views that interest rates would stay at record-lows in the nearest future, the Office for National Statistics reported. This was primarily driven by declining transport and food prices that had negatively impacted the inflation rate, which is well below the BoE's target of 2%. Consumer prices declined 0.1% compared with a year ago, the same as in September and in line with analysts' projections. This is the first time this year that inflation rate was below zero for two successive months. In monthly terms, consumer prices climbed 0.1%, also matching expectations. Core inflation, which excludes food, energy, alcoholic beverages and tobacco, stepped up 1.1% in October from September's 1%.

Watch More: Dukascopy TV

Upcoming fundamentals: FOMC minutes may indicate a rate hike in December



Minutes of the most recent meeting of the Federal Open Market Committee are due at 19:00 GMT on Wednesday. Analysts suggest that language used in the minutes may directly indicate that the regulator is on track to raise interest rates in December when policymakers hold their next scheduled meeting. Other fundamentals from the US include building permits and housing starts for the month of October. Data is estimated to come in quite mixed and no material change from September numbers is forecasted this time.


EUR/USD is slowly trending downwards

Ignoring the fundamental background, EUR/USD continued to underperform and closed below 1.0650 on Tuesday. As mentioned in our previous analysis 24 hours ago, the pair is aiming at April low for the moment, which is guarded by weekly S3, monthly S2 and lower Bollinger band at 1.0571/30. Moreover, an intermediate demand is represented by the weekly S2 at 1.0602. EUR/USD's decline can be fuelled by FOMC meeting minutes later on Wednesday, if they affirm Fed's willingness to hike rates in December.

Daily chart
© Dukascopy Bank SA

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's level matches the upper trend-line for the moment, representing extra bearish risk for EUR/USD.

Hourly chart
© Dukascopy Bank SA

Euro-positive market sentiment remains at 15-week high

Sentiment among SWFX market participants stabilised in the past 24 hours, even though EUR/USD continued to set new lows on Tuesday. At the moment bulls are keeping 56% of all trades in the SWFX market, the highest level in more than three months. Positive expectations, however, are still not shared by pending orders set to buy the 19-nation currency. Long commands in 100-pip range from the spot price account for just 40% on Wednesday, up marginally from 35% seen yesterday.

Meantime, sentiment among OANDA clients has been largely flat for a third consecutive day as bulls are holding 52.2% of all positions opened there. Alongside, bearish traders are still enjoying a slight majority in the SAXO Bank market, namely 52.57%, while bulls are in the minority with 47.43%.












Spreads (avg,pip) / Trading volume / Volatility




Vast majority of Community members forecast the Euro to plummet against the US Dollar this week

© Dukascopy Bank SA

This week Dukascopy traders continue to be bearish on the European currency's perspectives as 56.2% of all votes are set to go short on the EUR/USD currency pair at the moment.


According to Likerty, "the EUR/USD is continuing its bearish decent for 1.0640's, which was indicated a few weeks ago. It is a significant level and does not only screams for a test, but is also a high-probability reversal area for bulls."

Average forecast says EUR/USD will trade at 1.11 by February

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Oct 18 and Nov 18 expect, on average, to see the currency pair around 1.11 by the end of February 2016. Though the majority of participants, namely 60% of them, believe the exchange rate will be generally below 1.12 in ninety days, with 40% alone seeing it below 1.08. Alongside, only 16% of those surveyed reckon the price will trade in the range between 1.12 and 1.18 by the end of February.

© Dukascopy Bank SA

Actual Topics

Subscribe to "Fundamental Analysis" feed

Subscribe
To learn more about Dukascopy Bank CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
For further information regarding potential cooperation,
please call us or make callback request.
To learn more about Dukascopy Bank Binary Options / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Dukascopy Bank CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Crypto Trading / CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Business Introducer and other trading related information,
please call us or make callback request.
For further information regarding potential cooperation,
please call us or make callback request.