EUR/USD sets eye on 200-day SMA

Source: Dukascopy Bank SA
  • Sentiment among SWFX traders worsened further, as the bearish portion advanced to 56%
  • Most of the pending orders are still set to sell EUR vs USD
  • Consolidation above 55-day SMA will refocus attention to 200-day SMA at 1.1041
  • Daily indicators preserve the bullish aggregate outlook on EUR/USD
  • Economic events to watch in the next 24 hours: French GDP (Q3); Italian Industrial Sales (Oct) and Retail Sales (Oct); US Durable Goods Orders (Nov), Crude Oil Reserves (Dec 18) and New Homes Sales (Nov)

© Dukascopy Bank SA
The British Pound was a clear loser on Tuesday of this week, following a strongly disappointing public sector borrowing data. EUR/GBP surged by 0.8%, after the report revealed that the UK Government borrowed 14.2 billion pounds in November of this year, up from revised 6.7 billion pounds in October. This is the highest amount of monthly borrowing since 2013. Now the Chancellor George Osborne is at risk of missing his deficit target for the current financial year ending in four months. The present year-to-date borrowing rose to 66.9 billion pounds, just 2.6 billion pounds short of the annual goal. The only hope for the Government is January when Britain traditionally registers a large budget surplus. Meanwhile, commodity currencies including the Aussie and Kiwi advanced by 0.25% versus the Euro, due to a moderate oil price recovery.

The US economy grew at a slightly slower pace than initially expected in the third quarter. The nation's gross domestic product rose at a 2.0% seasonally adjusted annual rate in the three months through September, according to the Commerce Department, compared with initially estimated 2.1%. Economists, however, had expected a 1.9% expansion. The data suggests 2015 is on track to close out another year of steady growth, supported by an improving job market, robust home sales and pockets of wage increases. Nevertheless, headwinds remain: despite low gasoline prices, consumer spending has been muted throughout the year. Weakness in overseas economies, a strong US Dollar and low oil prices have weighed on the manufacturing, mining and energy sectors, damping business investment and exports and resulting in thousands of layoffs. The median projection from Fed officials as of December was for the world's number one economy to grow 2.1% this year and 2.4% in 2016. Consumer spending, the US economy's driver, rose at an unrevised 3.0% annual rate, contributing 2.04 percentage points to the quarter's 2.0% growth rate. Household spending on services increased at a 2.1% pace, with health care outlays alone accounting for 0.4 percentage points of the quarter's GDP growth.

Switzerland's trade surplus shrank notable in November as exports dropped, according to the Federal Statistical Office. The trade surplus dropped to CHF 3.14 billion from CHF 4.08 billion in October. Exports fell by real 2.1% from October, when it surged 6.2%. Furthermore, imports growth eased to 0.2% from 4%. Measured on an annual basis, Swiss exports soared 4.7% following an annual; 1.5% decline in October. Likewise, imports increased 4.7% in November, compared with 1.5% drop a month earlier. During January to November, the surplus totalled CHF 34.16 billion. Swiss watch industry continued to struggle amid export decline. Shipments declined 5.6% to CHF 1.95 billion, led by a 28% plunge in shipments to Hong Kong and 5.3% decrease to the US. It is the first time the value of November exports fell below CHF 2 billion in four years and compares with a 14% slump. The Swiss watch industry is facing the first annual drop in the value of exports since 2009, having dipped 3.3% in the first 11 months of this year. Growth has weakened due to the slowdown in China's economy and the aftermath of the 2012 crackdown on extravagant spending among government officials that undermined notably demand in Hong Kong.

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Upcoming fundamentals: Last busy working day before Christmas holidays in US/EU



Today the bunch of US fundamentals will begin coming out starting 13:30 GMT. Durable goods orders and personal consumption expenditures index are first up on Wednesday. Orders for long-term usage goods surged by 3.0% in October on a headline basis, and today the analysts estimate a cooldown of 0.6%. In the meantime, core orders have probably advanced by only 0.1% in November, after a climb of 0.5% in the preceding month. Meanwhile, the new home sales data for November is due at 15:00 GMT. Economists foresee the annualized growth of sales to 507,000 last month, up from 495,000 in October.


EUR/USD sets eye on 200-day SMA

Another bullish trading session was registered by the most traded FX cross on Tuesday. Daily gains amounted to 40 pips, but it was enough to violate the 55-day SMA at 1.0929. Now the nearest resistance is represented by the 50% Fibonacci retracement of an Oct-Nov downtrend and weekly R1 at 1.1009/14. However, even important supply is placed at 1.1041/56, namely the 200 and 100-day SMAs. One-day technical indicators are still projecting a positive trend for EUR/USD. Meantime, trading volume fell to the lowest level since Nov 30, meaning market volatility is likely to wane.

Daily chart
© Dukascopy Bank SA

EUR/USD was successful in crossing the 200-hour SMA on Tuesday, meaning now the outlook is positive for the common European currency. Alongside, the currency pair consolidated above the trend-line, which connects Dec 15/16 highs.

Hourly chart
© Dukascopy Bank SA

Bearish sentiment dominates in the SWFX market

Both EUR/USD's open positions and pending orders posted little changes in course of the last 24 hours of trading. The short traders are holding the majority (56%) of all trades, as the bulls (44%) were sent further to the downside by one percentage point. As for the commands, 60% and 54% of them are set to sell the Euro versus the Greenback in 50 and 100-pip ranges from the current market price, correspondingly.

Alongside, traders are remaining in the wait-and-see mode in both OANDA and SAXO Bank market for the moment. The total number of OANDA bearish positions is steady at 59.5% on Wednesday, while SAXO Bank clients are short on the observed currency pair in more than 67% of all cases.













Spreads (avg,pip) / Trading volume / Volatility




More than 68% of Dukascopy Community members see the Euro declining versus the US Dollar by December 25

© Dukascopy Bank SA

This week the overall sentiment on the EUR/USD became clearer, compared to previous week. The 68% of Dukascopy Community members are waiting for the Euro to drop further. The average prediction for December 25 is in turn located around the 1.087 level.


Concerning traders' opinions, babanu claims that "As the dust will start to settle after the first rate hike in almost a decade in US interest rates, we will gradually start to see a decline in this pair towards the parity. The Christmas break will come also and the liquidity will be scarce, but no more surprises to the North is expected".

Average forecast says EUR/USD will trade at 1.08 by March

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Nov 23 and Dec 23 expect, on average, to see the currency pair around 1.08 by the end of March 2016. Though the majority of participants, namely 57% of them, believe the exchange rate will be generally below this round level in ninety days, with 32% alone seeing it below 1.04. Alongside, only 24% of those surveyed reckon the price will trade in the range between 1.08 and 1.14 by the end of March.

© Dukascopy Bank SA

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