- Sentiment among SWFX traders is bearish, as 57% of all transactions are short
- Pending commands in 100-pip range from the spot picked up to be 55% Euro-bullish
- The pair is likely to hover in a limited range during another holiday week
- Daily indicators are pointing upwards on a daily basis, but change to bearish on a weekly time frame
- No major economic events are due this week
Japan's core consumer prices climbed for the first time in five months in November, whereas household spending declined, putting the Bank of Japan's view that robust consumption will boost inflation into question. The core CPI, which includes oil products but excludes volatile fresh food prices, inched up 0.1% in the reported month from a year earlier, beating expectations for a flat reading. The increase followed a 0.1% decline in October. At the same time household spending suffered the biggest annual decline in eight months, falling 2.9% in November from a year earlier. A separate report showed industrial Japan's industrial production dropped for the first time in three months in November, as exports declined more than expected. Industrial output slumped 1% in the measured month from October, compared with the forecast for a 0.5% decline. Measured on an annual basis, production was 1.6% higher. The data is likely to keep alive expectations that the BoJ Governor Haruhiko Kuroda may introduce additional stimulus measures as early as next month. In a bid to power the world's third biggest economy and to reach the inflation target, the BoJ announced an unexpected tweak to its monetary easing programme. BoJ policymakers rolled out a series of changes, including boosting their holdings in companies dedicated to capital spending and new hiring.
US factory orders for long-lasting goods including autos, airplanes and electronics were flat in November, as a strong Dollar and struggling global economy weigh on US manufacturers. The Greenback has gained almost 20% against the currencies of the US main trading partners over the last 18 months. According to the Commerce Department, non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4% last month. Core capital goods orders climbed by a revised 0.6% in October. They were previously reported to have increased 1.3%. New orders in the category were down 3.6% through the first 11 months of 2015 compared with the same period a year earlier. Durable goods orders have plunged 3.7% year-to-date. Gross domestic product expanded at a 2% seasonally adjusted annual rate in the three months through September, the Commerce Department said earlier in the week, driven by a 9.9% growth rate for fixed non-residential investment in equipment. Overall growth appears fairly steady as 2015 comes to an end. Macroeconomic Advisers expected US GDP to rise at a 1.9% pace in the fourth quarter.
EUR/USD is stuck near 1.0970
During the next few days EUR/USD is projected to develop sideways, owing to lack of fundamental drivers and low trading volume. The latter continued to fall down for a seventh consecutive day on Friday of the previous week when the trading session was very short. For the moment the pair is placed between the weekly pivot point (1.0932) and 50% Fibonacci retracement of an Oct-Nov downtrend (1.1008). Without any shocks, the cross is highly likely to act within these boundaries in the next 24 hours.Daily chart
Trading conditions remain largely undecided in the one-hour chart. We expect the pair to trade in a tight range in the run up to a second bunch of holidays, namely the New Year. This is going to be reinforced by tumbling trading volumes across the board.
Hourly chart
SWFX bullish-bearish divergence widened, while orders improved
Moreover, there are somewhat more bearish traders entering both OANDA and SAXO Bank markets. At OANDA, the bearish share of all transactions went up to 61% by the December 28 morning, while SAXO Bank clients are now short on the Euro in more than 68% of all cases (66% on Thursday).