- SWFX market remains divided and acknowledges lack of unanimity between bulls and bears
- Pending orders in 50 and 100-pip ranges add to uncertainty as they are broadly neutral on Thursday
- Trading is likely to be muted as US enjoy Thanksgiving Day
- Daily and weekly indicators are mixed with respect to EUR/USD
- Economic events to watch in the next 24 hours: Spanish GDP (Q3); Euro zone M3 Money Supply (Oct); German Gfk Consumer Confidence (Nov)
While the European economy has been struggling to solve the refugee crisis, a number of economists expect that inflow of around 800,000 people into Germany will boost the Euro zone's biggest economy. Experts estimate that asylum seekers will contribute to German economic output growth, adding 0.2% of GDP next year and calming Volkswagen's diesel emission scandal, which is expected to lower GDP growth by 0.03% in 2016. The German government predicts the Euro zone's star economy to expand by 1.8% in real terms in 2015 and 2016, with domestic demand being an important driver for growth. Meanwhile, sales at Italian retailers dropped in September, according to ISTAT. Italian retail sales slid 0.1% in the reported month from August, whereas measured on an annual basis consumer spending at retailers rose 1.5%. The Euro zone's third biggest economy seemed finally finding its way out of the woods, albeit at a slow pace. After years of stagnation, growth is back, with the Italian economy expanding in the first two quarters. The International Monetary Fund in October revised its forecasts for 2015 and 2016 by 0.1 percentage point, to 0.8% and 1.3% respectively.
Delivering the Autumn Statement and Spending Review, Chancellor George Osborne said the British economy is expected to expand by 2.4% this year. Moreover, growth for the next two years has also been revised up to 2.4% in 2016 and 2.5% in 2017. Osborne underlined the fact that since 2010 no economy in the G-7 group has expanded faster than the UK. Most importantly, the growth has been sustainable and has not been fuelled by an irresponsible banking boom. In his statement, the Chancellor said his economic plan for the next four years was about choosing priorities and insisted solving the "crisis" in home ownership is of a paramount importance. Osborne added that the four-year public spending plans were estimated to produce a surplus of 10.1 billion pounds by the end of the current parliament, which is more than he had projected in his budget speech in July.
Upcoming fundamentals: US Bank Holiday to bring no data on Thu and Fri
Due to the Thanksgiving Holiday in the US we expect to receive no fundamental statistics of any king from the world's largest economy today and on Friday. However, the events' calendar does not become completely empty and we will see some European data later in the day. Euro zone's broad M3 money supply is forecasted to grow by 4.9% in October on an annualized basis, no change from September. Alongside, the Gfk Consumer Climate Index for Germany is due at 12:00 PM GMT. The survey is based on responses from 2,000 consumers about their assessment of current and future economic conditions. Possibly, the Index will continue falling for a fourth month in a row, down from 9.4 points in October to 9.2 points this month.
EUR/USD touched 7-month low at 1.0565
A first bunch of strong US data boosted the Dollar on Wednesday, thus sending EUR/USD down to a 7-month low of 1.0565. However, later the pair rebounded to close the session somewhat above 1.0620. However, the bias is negative and we foresee additional losses for the Euro in the foreseeable future. Yesterday's development confirms ability of EUR/USD to slide as low as April low at 1.0519. This is the closest major support for the pair, which should be able to cap a sell-off for some period of time.Daily chart
EUR/USD dropped down exactly from the area, which was guarded by 200-hour SMA at 1.0680. It proclaims that the pair sees the simple moving average as a very serious resistance, which will try putting more downside pressure on the common European currency.
Hourly chart
SWFX sentiment shows no signals of either bullish or bearish lead
Expectations among OANDA and SAXO Bank traders remain mixed on Wednesday. OANDA clients believe the common currency has some growth potential as bulls are holding 51.82% of all open positions. In the meantime, 55.35% of SAXO Bank clients are short with respect to EUR/USD.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members forecast the Euro to depreciate against the US Dollar this week
This week sentiment among traded who participated in the quiz deteriorated further, as only 35% of them expect the Euro to rebound in the period from Nov 23-27.
As Jignesh suggests, "Last week reaffirmed the markets that the ECB will continue further stimulus, if required, and the FED is ready for a lift off. It once again strengthens the point of divergence between the monetary policies of both economies."