- SWFX open positions are mostly unchanged after light Monday trading (55% bearish vs 45% bullish)
- Traders are hesitant concerning future direction of EUR/USD, as 100-pip pending orders are equally divided between the bulls and bears
- Within the bearish pattern EUR/USD risks tumbling to 1.0650 in the medium-term
- Losses are also projected by aggregate weekly and monthly technical indicators
- Economic events to watch in the next 24 hours: FOMC Members Fischer and Lacker Speak; US JOLTS Job Openings (Nov)
Spain's industrial sector recovered in November on a non-seasonally adjusted basis. Industrial production surged 5.7% on year in the reported month, following a revised 0.2% decline in October. Moreover, industrial output increased 4.2% on a seasonally adjusted basis in November, compared with October's print of 4.1%. However, Markit's manufacturing PMI data showed a decline in activity in December to 53.0, down from 53.1. A separate report showed, Euro zone investor sentiment weakened more than expected in January as uncertainties over China's equity market and weaker global growth weighed on expectations. The investor sentiment index dropped to 9.6 in January from 15.7 in December, results of a survey by Sentix. It marked the first decline since October and was the weakest reading since January 2015. The sentiment was predicted to decline to 11.8. The robust current situation offset the slump in expectations. The current situation index dropped to 13 from 13.5 in December. A sub-index of expectations for the euro zone economy plunged to 6.3 from 18.0 in December, the lowest level since November 2014. An index tracking Germany, Europe's biggest economy, fell to 18.1 from 22.7, the weakest reading since October.
Real turnover in the Swiss retail sector dropped unexpectedly in November, adding to signs that the Alpine country continues to falter amid fragile recovery in the Euro zone and slowdown in emerging markets, particularly in China. Swiss sales volumes declined 2.1% on an annual basis in November, following a revised 1.2% decrease a month earlier. When measured on a monthly basis, seasonally adjusted turnover in the retail sector dropped by 0.8% in the reported month compared with October. Thomas Jordan, the Swiss National Bank President, predicts that the Swiss Franc would remain at its current level or slightly weaken in 2016. Jordan also hinted that the negative interest rates introduced last January may stay until the end of the year, hoping that negative rates will help to combat an overvalued Franc, which is undermining exports to the Euro zone. SNB President admitted, however, that the Fed's decision to hike interest rates in December had eased the situation, as the US Dollar gained ground versus the Swiss Franc. Overall, for 2015, the SNB has said it expects the country's gross domestic product to have climbed just under 1%, compared with 2% in 2014. The central bank predicts economic output to rise by 1.5% in 2016, although it will depend on the Franc's strength and developments in the global economy.
Upcoming fundamentals: A data-free day for Europe on Tuesday
European session on Tuesday is expected to be very calm, owing to a complete absence of fundamental data releases from this region. At the same time, some volatility is highly likely to be created by US trading later in the day. At 10:30 GMT the Federal Reserve Governor Stanley Fischer will participate in a panel discussion in Paris. The topics covered will include monetary policy, financial stability and extremely low interest rates. He will be joined by BOE and BOJ governors and IMF Director Christine Lagarde.
EUR/USD retreats from December downtrend
EUR/USD traded in a limited range on Monday amid lack of fundamental drivers throughout the day. By the end of American session the pair dipped down to the weekly pivot point at 1.0860. Strengthened by 20-day SMA, this support is expected to contain initial losses, unless any shocks happen. Additional demand is represented by a dense technical area at 1.0830/00 (55-day SMA, monthly PP). Given that the first major resistance is a two-month downtrend at 1.0922, we expect EUR/USD to hover in a tight range in the next 24 hours.Daily chart
The cross bounced off the upper trend-line of the bearish pattern yesterday, meaning the focus is now turning to the downside. Still, the EUR/USD's bears have to overcome the 200-hour SMA at 1.0848, which is followed by July 2015 low at 1.0808. By breaching these supports, the pair will come under intense selling pressure and will expose the pattern's lower edge at 1.0670.
Hourly chart
Most of SWFX market players are still betting on Dollar's climb
At the same time, bullish traders at OANDA and SAXO Bank managed to erode earlier losses that had occurred during the weekend. A report on OANDA open positions indicates that 58.5% of their clients are holding bearish trades at the moment, down from 59% on Monday. Among SAXO Bank market participants, the portion of the shorts is somewhat higher at 64.3% in the morning on January 12.