- EUR/USD held gains despite hawkish FOMC
- Broad range (100-pip) pending orders turned bullish (52%)
- US session to be more active and volatile than European trading on Thursday
- Daily technical indicators remain undecided; three "sell"/"neutral" signals and two "buy" signals in place
- Economic events to watch in the next 24 hours: German Bundesbank President Weidmann Speaks; Euro zone Current Account; ECB Monetary Policy Meeting Accounts; US Unemployment Claims (Nov 13), Philadelphia Fed Manufacturing Index (Oct) and Natural Gas Inventories (Nov 13); FOMC Members Lockhart and Fischer Speak
The minutes of the FOMC meeting in October reinforced the view that the Fed may finally hike interest rates as soon as next month, given job growth and inflation trends remain resilient and continue to improve. Yet, Fed officials remain divided, as some policy makers doubted that economic data available by the December meeting would warrant raising the target range for the federal funds rate. Markets seemed to be getting used to the idea of higher rates in the near future, as the US central bank has now warned about rate hikes so many times. While stocks usually tumble amid increase in rates, equities rose Wednesday, a sign that a rate hike is already prices into markets. Meanwhile, US housing starts dropped to the lowest level in seven months in October, while a surge in building permits signalled the housing market remained on firm footing. Groundbreaking plunged 11% to a seasonally adjusted annual pace of 1.06 million units, according to the Commerce Department. Moreover, September's figure was revised down to a 1.19 million unit pace, down from 1.21 million units. Nevertheless, October marked the seventh consecutive month that starts remained above 1 million units, the longest such streak since 2007. Housing has contributed to economic output growth in each of the last six quarters and is absorbing some of the slack from a sluggish manufacturing sector. Meanwhile, building permits soared 4.1% to a 1.15 million unit rate in October.
New Zealand producer prices increased at a solid pace in the third quarter, driven by a rise in dairy and meat prices as the weakness in the New Zealand Dollar boosted export prices, signalling inflationary pressures may be picking up. Producer prices climbed for the first time in over a year, with the output PPI, which tracks the change in prices of goods leaving the factory gate, surging 1.3% in the three-month period ended September. The increase followed a 0.2% decline in the preceding quarter, Statistics New Zealand said. Economists, however, had predicted a modest 0.2% increase in the reported period. At the same time, the input PPI, which measure the change in production costs, advanced 1.6% in the third quarter, after decreasing 0.3% in the June quarter. Statistics New Zealand said that the depreciation of the Kiwi Dollar influenced PPI prices.
Upcoming fundamentals: Bundesbank President to speak in Frankfurt on Thursday
Jens Weidmann, the President of the German Bundesbank, will deliver a speech at the International Monetary Fund's Statistical Forum in Frankfurt. While being the largest and one of the most hawkish members of the Eurosystem, Bundesbank and its officials may use the opportunity to express thoughts or even scepticism about the possible ECB's extension/expansion of QE programme next month. On top of that, the European Central Bank will publish the accounts of its latest meeting, which may indicate and confirm willingness of the regulator to provide more help for Euro zone's economy.
EUR/USD held gains despite hawkish FOMC
EUR/USD gained value on Wednesday, despite hawkish FOMC meeting minutes mentioning a potential rate hike in December. A rally is being extended on Thursday, with the pair trading above 1.07. Any bullish outlook can become the main scenario only in case EUR/USD surges past July low at 1.0808. Our medium term expectations remain fairly pessimistic with respect to the single European currency. Consolidation below 1.06 (weekly S2) is required, in order to completely refocus on April low at 1.0519.Daily chart
EUR/USD has just approached the upper trend-line of bearish pattern, which is strengthened by the 200-hour SMA. In case it manages to fix gains above 1.0720, we are going to erode our bearish expectations and change them to neutral for the time being.
Hourly chart
Euro-positive market sentiment cooled down marginally
Meantime, OANDA clients turned slightly bearish towards common European currency as the longs fell to 49.3% and the shorts advanced to 50.7% by Thursday morning. Alongside, SAXO Bank bearish traders decided to reject the idea of leaving the market; conversely, their share has only risen during Wednesday session to reach almost 55% today.
Spreads (avg,pip) / Trading volume / Volatility
Vast majority of Community members forecast the Euro to plummet against the US Dollar this week
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."