- 48% of commands are to buy and 52% to sell
- 52% of positions are long and 48% are short
- Today's target is the major up-trend at 1.0950
- Upside is limited by 1.1020
- Economic events: US Crude Oil Inventories, New Home Sales (Jan), Flash Services PMI (Feb)
German business confidence declined for a third consecutive month in February, as the outlook among manufacturing companies plummeted at the sharpest pace since shortly after the Lehman Brothers bankruptcy in 2008. According to Ifo economic institute, the business climate index declined to 105.7 in February, down from 107.3 a month earlier. China's slowing growth is hurting global trade and hurting German exporters, with net trade dragging on economic growth last quarter. Business expectations declined sharply to 98.8 from 102.3 in January, while current conditions climbed to 112.9 from 112.5 last month.
German exports decreased 0.6% in the final quarter of 2015, the Federal Statistics Office reported. Capital investment climbed 1.5% and government spending rose 1%, leading the 0.3% growth of gross domestic product. Measured on an annual basis, the Euro zone's number one economy expanded 1.3% during the quarter, while for the whole 2015, economic output increased 1.7%. Deteriorating prospects for the world's economy and volatile financial markets threaten to undermine growth in the German economy. Destatis reported that public consumption in Germany climbed 1% in the fourth quarter from the previous period, while private consumption inched up 0.2% over the reported period, supported by a robust labour market and increasing wages.
Euro side to remain quiet; focus on US oil inventories
There are no notable Euro zone economic releases today. Instead, the focus will be on the US data. In particular, given the increasing importance of fluctuations in oil prices, we should be wary of the change in the US commercial crude oil inventories to be released at 03:30 pm GMT, which stood at 2.1M a week ago. Additional volatility could be due to the new home sales report. According to the estimates, 522K of new single-family homes were sold in January after 544K reported a month ago.
EUR/USD approaches support up-trend
EUR/USD retains potential to go lower from here. There are still 40-50 pips left until the probable turning point. The 1.0972/51 demand area consists of several notable levels, including the lower bound of the ascending channel, 100-day SMA, and monthly R1. In case it holds, the target for the next month will be the October 2015 high at 1.15. However, if the price keeps falling nonetheless, we are likely to see a test of the late January lows around 1.08 dollars.Daily chart
In the hourly chart, the pair is trading under the lower bound of the recently broken channel. Accordingly, while today's target is the major up-trend at 1.0950, the upside is limited by 1.1020.
Hourly chart
SWFX sentiment mixed
There are relatively more bears elsewhere. For example, according to the data provided by OANDA, 56% of its clients are short the Euro against the US Dollar. Saxo Bank traders are even more pessimistic with respect to the common currency. Right now, as many as 62% of the Danish bank clients prefer to be short.
Spreads (avg,pip) / Trading volume / Volatility
20% of traders expect Euro to cost between 1.113 and 1.105 dollars
Participants of the Dukascopy Community Forecasts quiz support the general promising view on the pair, with 63.5% of all votes being long at the moment. The average expectation for the end of the current week is located at 1.115. However, the price range with the most significant portion of votes is 1.113/05 - a fifth of all votes fell here.
Nightrader is bullish on EUR/USD this week. According to him, the pair "is currently in a phase of retracement within a visible uptrend in the daily time frame, while the weekly time frame shows that prices are in a phase of a major drop." On a condition that "prices in the next few days break the visible bearish channel in the 4-hour chart", there "can be a movement towards 1.120, confirming the uptrend in the short term," he added.
In the meantime, another Dukascopy Community member, saso, reckons that it is better to be bearish on EUR/USD, but admits that his outlook "depends on sentiment that could impact FX trading." In case the week commences "on a positive note, then EUR/USD should fall," and if the week starts on a negative note, then the pair should rise.