- The bearish-bullish gap among open positions was curbed from 18% to 12% by Friday morning
- A slight majority of EUR/USD's 100-pip pending orders are now set to buy the Euro vs Dollar
- Better-than-estimated US jobs' numbers should help the Buck to reclaim 1.08
- Weekly and monthly technical indicators see the pair lower in the long run
- Economic events to watch in the next 24 hours: German Industrial Production (Nov) and Trade Balance (Nov); French Trade Balance (Nov) and Industrial Output (Nov); US Non-Farm Payrolls, Average Hourly Earnings and Unemployment Rate (Dec)
Euro zone economic sentiment improved in December, as the jobless rate continued to decline. The European Commission survey showed that economic sentiment rose to 106.8 points last month, up from 106.1 points a month earlier. The Euro area's jobless rate dropped to the lowest level in four years in November, coming in at 10.5% down from 10.6% in October and compared with 11.5% in November 2015. The unemployment in a wider European Union was 9.1% in November, down from 9.2% in October. That was the lowest rate since July 2009. Among the member states, the lowest unemployment rates in November were recorded in Germany (4.5%), the Czech Republic (4.6%) and Malta (5.1%), and the highest in Greece (24.6% in September 2015) and Spain (21.4%). A separate report showed Euro zone retail sales unexpectedly decreased in November for a third consecutive month. Sales at European retailers contracted 0.3% in the reported month, compared with a downwardly revised 0.2% decline in October. On an annual basis, retail sales climbed 1.4% in November, following a downwardly revised 2.4% increase in the preceding month. Meanwhile, German factory orders rose 1.5% in November, overshooting economists' expectations for a 0.1% gain. On a yearly basis, the gauge surged by 2.1% in the reported month, after posting a revised 1.6% decline in the previous month.
Australians opened their wallets more willingly a month prior to Christmas. Retail sales increased 0.4% in November from a month earlier, when the gauge rose an upwardly revised 0.6%, the Australian Bureau of Statistics reported. Household goods retailing climbed 0.9% in November, while dining out food services increased 1%, and food retailing rose 0.2%. Clothing, footwear and personal accessory retailing was up 0.8% and other retailing gained 0.4%. From a year earlier, sales rose by 4.34%, an acceleration on the 3.93% pace seen in October. People's perceptions of their family finances compared with 12 months ago were at the highest level in seven years, according to weekly ANZ-Roy Morgan consumer confidence data. The Reserve Bank of Australia has tried to boost consumption by making monetary conditions easier on households. Last year, the central bank slashed the cash rate to a record-low 2.0%, and in December signalled that further easing could be on the table if demand needed more support. Weak inflation could prompt the RBA to cut interest rates again this year, with the CPI climbing only 1.5% year-on-year in the third quarter, below the bank's 2-3% target range. Market participants see less than a 20% chance of a cash rate cut to 1.75% at the RBA's February 2 meeting.
Upcoming fundamentals: US companies to add 203,000 jobs in December
Friday is all about employment statistics from the world's biggest economy. Analysts expect the US employers to create somewhat more than 200,000 new jobs in December 2015, down marginally from 211,000 in November. At the same time, the unexpectedly optimistic ADP report showed Wednesday that employment gained 257,000 last month. ADP change in employment has not always been a good predictor of data released by the US Labour Department, but it usually manages to define a trend, which is definitely positive this time. Alongside, an unemployment rate in the US is assumed to hold steady at 5%, while monthly wages have probably risen by 0.2% in December.
EUR/USD meets December downtrend after 150-pip rally
Risk-off sentiment, which is currently driving FX and other markets, pushed the Euro considerably to the north against the Greenback on Thursday. Helped by rising trading volume, EUR/USD eroded all nearest resistances and finished the US session just under the monthly downtrend at 1.0930. Following these gains, which were the strongest since early December (post-ECB rally) we expect a bearish correction today. Positive US NFP could provide another momentum to the Dollar, which will move the pair towards a dense technical cluster at 1.08.Daily chart
Despite a recovery above the 200-hour SMA on Thursday, another downtrend is not ruled out for the moment. Yesterday's uptrend seems quite fragile, given that markets expect a strong day for US fundamentals, which are able to resend the pair back below 1.0860.
Hourly chart
Market sentiment and pending orders revived by Friday morning
Both OANDA and SAXO Bank market participants enlarged and expanded their portfolios in terms of short open positions on the EUR/USD currency pair. Now more than 58% (55% yesterday) of OANDA clients are bearish with respect to the cross. Alongside, SAXO Bank's negative positions increased from 62% to 64% by the January 8 morning.
Spreads (avg,pip) / Trading volume / Volatility
More than 57% of Dukascopy Community members see the Euro declining versus the US Dollar by the end of this week
This week traders' expectations did not change a lot, with 57% of Dukascopy Community members still predicting the pair to lose value.
Concerning traders' opinions on the matter, Zildjian suggests that "we can assume that the price will continue to fall and probably will reach the 1.075 level." Moreover, agddivisas observes that "now the pair is falling until the resistance level of 1.075. After that, the trend will change to the bearish one."