- Sentiment among SWFX traders has been unchanged (57% short) since Monday of the previous week
- According to pending orders, market participants are ready to buy the Euro in more than 50% of all cases
- Key supply for EUR/USD is 1.1044, where 100-day SMA is coinciding with 200-day SMA and weekly R2
- Short-term technical studies are mixed, as weekly indicators foresee losses for EUR
- Economic events to watch in the next 24 hours: Euro zone and US Manufacturing PMI (Dec); German CPI (Dec); US ISM Manufacturing PMI (Dec) and Construction Spending (Nov)
The number of Americans applying for unemployment benefits increased sharply in the week ended December 26, with some of the gains might be attributed to temporary holiday factors. Initial jobless claims surged by 20,000 to a seasonally adjusted 287,000, according to the Labor Department, marking the largest one-week rise since February and the highest reading for jobless claims since the week ended July 4. Economists, however, had predicted a smaller increase in new claims to 270,000. Unemployment claims data can be volatile from week to week, particularly around holidays due to seasonal adjustments. The four-week moving average, which smooths out weekly volatility, climbed by 4,500 in the reported week to 277,000. Furthermore, the number of continuing jobless claims increased by 3,000 to 2,198,000 in the week ended December 19. Nevertheless, claims remained near historically low levels, an indication of a strong job market. Cleveland Fed President Loretta Mester predicts the US economy to grow at a slightly faster pace in 2016 than last year. Mester forecasts the world's number one economy to expand at a 2.5% to 2.75% pace in 2016. At the same time, Fed policy makers project that they will further raise the target range by a full percentage point over the course of the year, to 1.25%-1.5%.
Consumer inflation in Spain, the Euro zone's fourth biggest economy, unexpectedly declined in December, sending another warning signal to the European Central Bank. The annual consumer price index came in at 0.0%, the INE reported, against economists' expectations for a 0.1% gain. In November, the index dropped 0.3%. Measured on a monthly basis, the reading slid 0.3% in December, after a 0.4% increase in the previous month. The EU-wide measure of inflation, or harmonized index of consumer prices, declined 0.1% annually in December, compared to a 0.1% climb predicted by economists. November saw the measure dropping 0.4%. The gauge dipped 0.4% month-on-month in December, exceeding economists' expectations for a 0.2% decline. A separate report, Spain logged a current account surplus of 2,388 million euros in October, up from 1,695 euros million marked a month ago, the Bank of Spain reported. Measured on an annual basis, the total current account balance in Spain showed a surplus of 2,388 million euros in October 2015, compared with 1,241 million euros recorded in the same month a year ago.
Upcoming fundamentals: PMI statistics to dominate European calendar on Monday
Several countries in the Euro area will release their production PMI indicators for December 2015. Analysts estimate no broad revisions to preliminary readings published two weeks ago. The Euro zone manufacturing PMI is projected to be flat at 53.1 points, thus signalling a healthy growth of the sector. In the meantime, US manufacturing data will be out at 15:00 GMT when the ISM PMI indicator will be out later in the day. Contrary to Europe, manufacturing industry in the world's largest economy is at risk of posting further contraction, even though the indicator is forecasted to grow up from 48.6 to 49.1 points in December. The latter is expected to be one of the main volatility drivers during the whole trading session on Monday.
EUR/USD attempts to bounce off 55-day SMA
Last trading day of 2015 was bearish for the EUR/USD currency pair when it tumbled below the 1.09 mark to settle near 1.0855. During the January 4 Asian session, however, we are seeing a confident recovery around 1.09. This level is reinforced by the weekly pivot point and, if violated, we would allow for gains to be extended through 1.0950 in the nearest future. A longer-term bullish goal is placed at 1.1044 where the 100-day SMA is currently merging with 200-day SMA. From another side, the closest demand is 55-day SMA 1.0864.Daily chart
Market volatility will resume growing along with trading volume throughout the first week of January when we expect many important fundamentals to be published. While hovering below the 200-hour SMA in the one-hour chart, the outlook is somewhat dampened for the moment. However, the core bearish strength will be tested at July low (1.0808), which remains a key demand for the pair.
Hourly chart
Orders to buy the Euro climbed to enjoy majority on Monday
At the same time, advantage of the bears over bulls decreased in both OANDA and SAXO Bank markets. The former's short traders are holding 58.69% of all positions at the moment, down from around 60% last Thursday. Alongside, SAXO Bank market participants decreased their bearish positions from 69% to 65% by January 4.