- There is no visible difference between the buy and sell orders
- SWFX market participants are undecided
- Upper edge of the channel is at 1.1120
- Nearest significant support is at 1.1050, represented by the 200-day SMA
- Economic events: Euro Area and German Manufacturing and Services PMIs (Feb)
The Euro zone is trying hard to rebound to its pre-crisis peak, struggling with such problems as a slower growth rate, slump in bank shares as well as refugee crisis. The Euro area's economy grew at an annual rate of 1.1% in the final quarter of 2015, less than it was in the run-up to the 2008 global financial crisis. The European Central Bank responded to the crisis by cutting its key interest rate to negative 0.3% in December and extending its bond-buying programme of 60 billion euros a month until March 2017. However, investors were left disappointed as they were anticipating deeper rate cuts and additional asset purchases.
ECB Vice-President Vitor Constancio said that a lack of confidence in getting inflation pressures higher could cause the central bank to deliver more stimulus as soon as next month. However, the decision has not been made yet. With the risks to the downside, Mr. Constancio still believes that the Euro zone's economy continues to recover. The official highlighted that while European-area growth might be tepid it would be worse without the ECB's actions, which have helped to lower borrowing costs and boost growth. Nevertheless, Mr. Constancio admitted that it is quite possible that the European economy will soon see data showing negative inflation readings, given the recent shock of more energy price drops.
Sentiment among purchasing managers to deteriorate
It is a news-heavy day for the Euro. Although there are no high-impact events, there will be plenty of reasons for Euro crosses to move either way. However, high volatility it is still unlikely, given generally low level of activity at the very start of the week. Both the Euro Area manufacturing and services PMIs are expected to decline. From 52.3 and 53.6 down to 52.0 and 53.3, respectively.
EUR/USD stabilises ahead of 200-day SMA
EUR/USD undergoes a downside correction within a bullish channel. Our bias is therefore bearish until the rate reaches the 1.0970/60 area, probably in a week's time. There, the lower bound of the pattern is reinforced by numerous studies, including the monthly R1 and 100-day SMA. The nearest significant support is at 1.1050, represented by the 200-day SMA. In the meantime, the upside is relatively free from strong resistances up to the monthly R3.Daily chart
The hourly chart also implies intraday bearishness. The currency pair has just confirmed the upper boundary of the emerging descending channel, meaning the bears are to stay in control until we hit the support trend-line at 1.1050.
Hourly chart
SWFX sentiment neutral; elsewhere positions are net short
The attitude of OANDA and Saxo Bank traders is more pronounced. In the first case, 44% of open positions are long. In the meantime, the bearish sentiment among the clients of the Danish bank is even stronger - only 36% of open positions are long, the remaining 64% are short.