- Bullish share in the SWFX market is unchanged at 45%
- Pending orders in both 50 and 100-pip ranges are bearish again the majority of cases
- US economic growth numbers to be in focus; negative surprise will expose 1.0970 (100-day SMA)
- Aggregate daily technical indicators are mixed, with CCI joining the "sell" side over the last 24 hours
- Economic events to watch in the next 24 hours: French GDP (Q4) and CPI (Jan); German Retail Sales (Dec); Spanish GDP (Q4); Euro zone CPI (Jan); US Advance GDP (Q4), Chicago PMI (Jan) and Reuters/Michigan Consumer Sentiment Index (Jan); FOMC Member Williams Speaks
German inflation rose on an annual basis in January, but remained well below the targeted level. Consumer prices in the Euro zone's biggest economy climbed 0.5% year-over-year in the beginning of the year, compared with the 0.3% growth recorded in December, the Federal Statistics Office reported. A separate measure, the Harmonized Index of Consumer Prices, showed inflation picking up 0.4% on year, up from a 0.2% gain in December. Germany's strong labour market could push wage growth higher and with it also core inflation. However, price pressures are likely to remain weak, given signs that the German economy might be slowing. A precipitous plunge in oil prices raised questions about the European Central Bank's ability to boost inflation up toward its 2% target for the whole Euro zone. After the central bank eased policy further in December, ECB President Mario Draghi reassured that the central bank still has plenty of options left to fight low inflation, suggesting it could act as early as March. Meanwhile, a separate report showed the mood in the 19-nation currency bloc declined more than expected in January. According to the European Commission, economic sentiment across the region slid to 105.0 in the current month, compared with a downwardly revised 106.7 in December.
The UK economy gathered a little steam at the end of last year, thanks to a support of the services industry, while production and construction continued to drag the growth down. Britain's gross domestic product increased 0.5% in the December quarter from the preceding three-month period, when it rose 0.4%, according to the Office for National Statistics. On an annual basis, the UK economy expanded 1.9% in the final quarter of 2015 from a year earlier, compared with 2.1% in the third quarter and marking the smallest gain since early 2013. Services were again the main driver for growth. Accounting for 78.6% of Britain's economic output, the sector expanded 0.7% on the quarter and climbed 0.2% between October and November. The biggest contribution to growth in this sector came from business services and finance, which added to the output with 0.9 percentage points. At the same time, industrial production dropped 0.2%, with manufacturing unchanged and utilities and mines cutting output. Construction output declined 0.1%. Overall, the UK growth slowed to 2.2% in 2015 from 2.9% in 2014, the ONS added. The International Monetary Fund estimates that it will expand 2.2% this year. While economic output has risen for 12 consecutive quarters and unemployment is at its lowest level for a decade, the Bank of England is focusing on global headwinds.
Upcoming fundamentals: Busy European session ahead
The highest share of EU fundamentals will have already been published by the time this report is released. The French economy rose by 0.2% in Q4 and by 1.3% on a yearly basis, which was slightly better than expected. From France, we expect the CPI numbers to come out later today at 7:45 GMT. Inflation is set to grow to 0.3% in January on year-to-year basis, while plummeting 0.9% on a monthly basis in December. Spanish GDP data will be out at 8:00 GMT and analysts see a continuous strong growth trend of 0.8% in the last three months of 2015. For the whole year the fourth largest Euro zone economy is estimated to surge by 3.4%. Meanwhile, Mario Draghi's favourite inflation reading for January will be released at 10:00 GMT. Somewhat positive news is likely, being that economists are betting on the CPI index of 0.4%, up from 0.2% in December.
EUR/USD keeps targeting 1.096 before US GDP
EUR/USD rallied for a fourth consecutive day on Thursday and touched the closest resistance area around 1.0950/70. Friday's Asian session is registering some profit taking, but US GDP later in the day will be a key driver for this currency pair. A negative surprise can result in a climb above 100-day SMA at 1.0972, followed by another formidable supply near 1.1050 (200-day SMA; weekly R2). Positive data, however, should pave the way for EUR/USD's drop toward 55-day SMA at 1.0835, which is preceded by two-month uptrend 15 pips more from the upside.Daily chart
The pair failed to penetrate a two-month downtrend in the one-hour chart at 1.0955. Some correction is possible, but the bulls have to look at 200-hour SMA at 1.0873 and July 2015 low at 1.0808 for possible upward momentum.
Hourly chart
Orders were repeatedly unable to hold above 50%
Mentioning market sentiment among other participants, OANDA's gap between the longs and shorts widened even more yesterday. At the moment only 38% of all positions are positive, and this is the lowest share of bulls among all major currency pairs there. Alongside, SAXO Bank traders are bearish in 67% of all cases today.
Spreads (avg,pip) / Trading volume / Volatility
68% of Dukascopy Community members are now looking for losses of the Euro vs US Dollar
This week the overall sentiment on the EUR/USD cross deteriorated again. The majority of Dukascopy Community members are now waiting for the Euro to decrease, even though the opposite sentiment had been observed a week before. The average prediction for February 1 is located around the 1.08 level.
Among traders, Blacklightning assumes that a lot will depend on the European Central Bank. He says that "Draghi sends a signal of potential easing in March. In the short-term I would expect EUR/USD to reach levels between 1.04 and 1.032. I also expect that the ECB will postpone further easing during March meeting, as it is too early to act and stock markets will fall further after the brief rebound. Therefore, for this calendar year I see EUR/USD not below 1.03 and, as result of stock market decline, as high as 1.20-1.22."