- Portion of commands to sell the single currency inched higher from 54 to 62%
- Difference between the of longs and shorts is negligible
- Dense supply area is at 1.1080
- Strong support is circa 1.0960 dollars
- Economic events: German CPI (Feb), US GDP, Goods Trade Balance (Jan), PCE Price Index (Jan), Personal Spending (Jan), UoM Consumer Sentiment (Feb), Powell and Brainard Speeches
Inflation across the currency bloc was lower than initially estimated in January, adding to signs that the European Central Bank is likely to deploy more stimulus as soon as next month. Eurostat reported that the annual rate of inflation in January was 0.3%, compared with the previous estimate of 0.4%. Although consumer prices are gradually climbing, the annual rate is still way off the central bank's target of just under 2%. The consensus in markets is that the inflation rate will slide to 0.1% in February due to renewed weakness in oil prices. After stripping out the volatile components of energy, food, alcohol and tobacco, the Euro zone's core inflation remains below the target at 1%.
Meanwhile, the Spanish economy continued to expand in the final quarter of 2015. The Euro zone's fourth biggest economy grew 3.5% on an annual basis, accelerating from 3.4%, a significant improvement compared with the 1.4% growth in 2014. That was the quickest growth since 2007, when Spain's economy added 3.6%. The main upside driver was domestic consumption. At the same time, in Italy shoppers purchased less in December, with retail sales falling 0.1% in December, following November's gain of 0.2%. Measured on an annual basis, retail sales increased 0.6%.
Price level in Germany to increase; US GDP expansion decelerates
Among the Euro Area events left for today, the most important is the German inflation report. According to the Federal Statistical Office, the prices fell 0.8% last month, and the estimates are that CPI will increase by 0.5% in February. All the attention, however, will be on the United States. The market expects that the GDP growth in the last quarter of 2015 slowed down to 0.4 from 0.7%. Additional reasons for the major pairs to be volatile will be the reports on personal spending, goods trade balance, PCE price index. Moreover, later in the day two FOMC members might expand on the Fed's future actions regarding monetary policy normalisation.
EUR/USD lunges at 200-day SMA
The Euro rebounded after it touched upon the formidable 1.0970/50 demand area. However, the 200-day SMA remains intact, and it still might not let the rate to exit this week's range. In case of a close above 1.1050, the rally will have a good chance of extending up to 1.1115, namely the monthly R2 level. In the longer-term perspective, EUR/USD is expected to recover to 1.14 dollars, which is the current level of the upper bound of the ascending channel.Daily chart
The currency pair is about to hit a dense supply area at 1.1080, consisting of the 200-hour SMA and the down-trend. The outlook for today is therefore bearish, with the decline potentially extending down to 1.0960.
Hourly chart
SWFX sentiment stays mixed
The sentiment at OANDA has also become neutral. The Canadian broker reports that the percentage of short positions fell to 53%. In the meantime, the distribution between the bulls and bears at Saxo Bank remains stable: 38% of positions are long and 62% are 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.