- The share of long positions stabilized at 44% in the SWFX market
- Orders to buy/sell the pair are undecided in 50-pip range and are 55% bearish in 100-pip range
- European data to predominantly drive EUR/USD on Tuesday, as US triggers to arrive by Wednesday
- Daily studies are neutral with respect to EUR/USD
- Economic events to watch in the next 24 hours: German CPI (Dec) and ZEW Economic Sentiment (Jan); Euro zone Current Account (Nov) and CPI (Dec)
French President Francois Hollande declared "a state of economic emergency" to combat persistently high unemployment rate and increase his chances of re-election next year. Hollande pledged to redefine the nation's business model, unveiling a 2-billion euro plan to boost employment. Hollande's proposals include deregulation aimed at an encouraging companies to take on new workers, a bonus of 2,000 euros to small firms that hire young people, as well as training schemes for half a million people. Hollande's Socialist government has struggled to underpin French growth or lower chronic unemployment, which has remained around 10% for years. Since 2012, when Hollande assumed leadership, more than 600,000 people have joined the ranks of the unemployed. France recovered from three-year long stagnation last year, with economic growth of more than 1%, which appeared to insufficient to absorb young graduates seeking to enter the job market. Meanwhile, Italy, the Euro zone's third biggest economy, posted a trade surplus with the rest of the world of 4.409 billion euros in November, compared with 3.422 billion euros a year ago. The Italian economy is likely to grow 1.5% this year, driven by domestic demand, according to the European Commission.
The Bank of England newest rate-setter Gertjan Vlieghe hinted that interest rates may remain lower for longer or even be cut if a slowdown in Britain's economy intensifies. Vlieghe, who joined the central bank's Monetary Policy Committee in September, said that he wants to see more clues that economic growth is holding solid and inflationary pressures are mounting, before voting for a rise in borrowing costs. Vlieghe's comments are likely to strengthen expectations in financial markets that the Bank of England will not immediately follow the Fed and raise short-term interest rates from record lows. Investors doubt the UK central bank will hike its key rate from 0.5% until mid-2017. In his comments, Vlieghe said pay growth appeared to have stalled, adding that he was not confident that annual inflation is moving towards the central bank's 2% target. Vlieghe said that heavy debt loads, ageing populations and rising inequality meant that interest rates in many developed economies should stay lower now than they were in the past to support growth. BoE's Governor Mark Carney is due to address rate expectations in a speech later in the day. In July last year, he said decision on whether to hike rates would become clear around the turn of the year.
Upcoming fundamentals: German economic confidence set to drop in January
A German ZEW survey, which is based on replies from analysts and institutional investors, is expected to show a drop in economic sentiment in the first month of 2016. The indicator has an average estimate of only 8.2 points, or half from what we had observed earlier in December. Despite that, any reading above zero indicates rising economic expectations. As for the European inflation data, which will be out at 10:00 GMT, here the majority of economists are united in assuming there will be no change to the preliminary forecast of a 0.2% annual inflation. The final core CPI is set to come out at 0.9%, well below the 2% inflation goal of the European Central Bank.
EUR/USD oscillates below 1.09 by Tuesday
Trading was purely technical during Monday sessions in Asia, Europe and US. EUR/USD saw dropping trading volumes to the lowest level since January 3, which triggered a marginal downward volatility to push the pair under 1.09. It refrains to return back into the bearish pattern, meaning our short-term positive outlook remains relatively intact. The pair is required to surge above 100-day SMA at 1.10 to confirm its positive intentions, but much higher turbulence will probably have to wait until full-of-data Wednesday.Daily chart
EUR/USD has neared the 200-hour SMA in the one-hour chart. This line is located at 1.0877, while additional support is offered by the upward-sloping January trend-line around 1.0840 and July 2015 low at 1.0808. They all are determined to keep the pair within the pattern, meaning any short-term weakness will ultimately result in more gains for the Euro vs Dollar.
Hourly chart
Sentiment remains Euro-short, pending orders are also mostly bearish
Meanwhile, 54.34% of OANDA clients continue holding bearish positions on the EUR/USD currency pair. Traditionally, SAXO Bank market participants are even more pessimistic with respect to the observed cross, as their bearish traders are enjoying a majority of 65.1% on January 19.