- Sentiment among SWFX traders is 57% short so far this week
- Expectations diminished as more pending orders are now set to sell EUR vs USD
- The strongest supply and demand are provided by the respective 1.10 and 1.09 areas
- Daily technical indicators are still unsure, whether EUR/USD will advance or decline
- Economic events to watch in the next 24 hours: Spanish Flash CPI (Dec) and Current Account Balance (Oct); Euro zone M3 Money Supply (Nov); US Pending Home Sales (Nov) and Crude Oil Inventories (Dec 25)
Retail sales in Spain increased for the 16 consecutive month in November amid a falling unemployment and an improved macroeconomic landscape. According to the National Statistics Institute, Spanish retailers enjoyed a 3.3% rise in sales in the reported month following an upwardly revised advance of 6.0% in October. The gain was mainly driven by an increase in sales of household equipment by 4.7% and personal equipment by 3.6% in November. In contrast, food sales declined by 0.2% in November on an annual basis. Furthermore, retail hiring climbed 1.8% in November, the fastest pace since Spain entered a deep recession in 2008. Meanwhile, business confidence in Italy's manufacturing sector unexpectedly declined, after registering 52-month high in October and November. The Manufacturing Confidence Index fell to 104.1 points in December, from a revised 104.4 booked a month ago. Analysts had forecast 104.4 points. Nevertheless, the index has now remained above the 100 threshold for the eleven months in a row. Spain's economy expanded 0.8% in the third quarter, while the growth rate in Italy was lower than expected at 0.2%, according to EU data.
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.
Upcoming fundamentals: Spanish inflation to grow above zero for first time since July
Spanish CPI statistics will be released at 8:00 GMT on Wednesday. Consumer prices are estimated to increase by 0.1% in December, up from a drop of 0.3% in the preceding month. Such a rapid change in the CPI indicator is possible due to a decreasing negative effect from an oil price drop, which took place in 2014 and early-2015. Meanwhile, US pending home sales data will be out at 15:00 GMT. Sales are projected to grow by 0.6% in November, following an increase of 0.2% a month before. Both of these data releases are likely to trigger some FX volatility in course of today's trading.
EUR/USD drops after volatile US session
EUR/USD became increasingly turbulent after the US session began yesterday. From daily highs, the pair dipped about 75 pips to close at 1.0919. As a result of this move, the weekly pivot point was penetrated, while the main support at 1.09 is offered by 55/20-day SMA, weekly S1 and monthly R1. Hence, the Euro has a good chance of getting a reliable bullish momentum from this demand zone. In the meantime, the gains are still estimated to be contained around 1.10 (Bollinger band; weekly R1, 50% Fibo).Daily chart
In the one-hour, the EUR/USD cross is managing to stay afloat due to presence of 200-hour SMA at 1.0920. In case this demand is violated, the next bearish target will be located at 1.0808 (July low). At the same time, a tranquil trading session is likely throughout Wednesday, as volatility wanes amid New Year holidays.
Hourly chart
Pending commands tumble as EUR/USD retreats
Meantime, both OANDA and SAXO Bank sentiment has been steady in course of the last 24 hours of trading. OANDA's bearish share of all transactions accounts for 61% today, while SAXO Bank clients are still short on the Euro in around 69% of all cases.
Spreads (avg,pip) / Trading volume / Volatility
This week only a slight majority of Dukascopy Community members see the Euro declining versus the US Dollar by the first day of 2016
This week the sentiment for the EUR/USD cross is more positive, compared to previous week. Only 52% of Dukascopy Community members are waiting for the Euro to drop further. The average prediction for January 1 is placed at 1.09.
Concerning traders' opinions, Likerty suggests that "Bearish correction towards 1.0770's is still in the process, but a return to 1.0960's may end up with another attack on the highs. It is a major pivot for long and short term developments." However, megajorko thinks that "presently EUR/USD is in a bullish mode. There were two attempts from the bears, but they resulted only in short corrections. Due to the low liquidity, I suppose the pair will be volatile."