- SWFX sentiment is bearish in 57% of all cases, up from 56% yesterday
- For the first time in seven days pending orders are EUR-short
- Key bearish target is now 38.2% retracement at 1.1145, as bulls were unable to contain losses at 1.1220
- Aggregate daily technical studies are bullish and only RSI indicator assumes EUR/USD is overbought
- Economic events to watch over the next 24 hours: Swiss ZEW Survey (Mar); Bundesbank President Weidmann Speaks; US New Home Sales (Feb); FOMC Member Bullard Speaks
German business confidence strengthened for the first time in four months, in a sign that domestic demand is shielding German companies from sluggish global growth. The Ifo institute's business climate index climbed to 106.7 in March, up from 105.7 in the preceding month. German businesses have increased their dependence on domestic demand as a China-driven downturn in emerging markets curtails exports. At the same time, the ZEW Center for European Research in Mannheim reported its index of investor expectations, which aims to predict economic developments in the coming six months, surged to 4.3 in March from 1 in the previous month. The gauge rebounded from a 16-month low after market turmoil calmed and the European Central Bank launched fresh monetary stimulus. However, a separate report showed German manufacturing increased at the slowest pace in 16 months in March. Markit's manufacturing PMI declined to 50.4 from 50.5 in February, a sign that the Euro zone's powerhouse is feeling pressure of weakening global demand. The Bundesbank said that Europe's largest economy will probably maintain its "solid rate of expansion" this quarter, but there may be a slowdown in the next three months.
The Reserve Bank of Australia Governor Glenn Stevens welcomed signs of house price growth cooling in Melbourne and Sydney thanks to timely regulatory measures on lending standards. Mr Stevens said that it was too soon to judge whether the turbulence that roiled financial markets early this year has come to an end, but he underlined Australia's resilience against any potential shock. The local financial system has been strengthening despite a sudden slowdown in China and uncertainty over the effect of European and Japanese monetary policy. In the meantime, a report from the Australian Bureau of Statistics showed that house-price inflation in Australia continued to wane last quarter, with prices climbing at the slowest pace since the September quarter 2012. Australia's House Price Index increased 0.2% in the final quarter of 2015 after the 2.0% rise in the preceding three-month period. On an annualized basis, house prices surged 8.7% in the three months through December, with Sydney recording the largest annual price advance of 13.9%, followed by Melbourne where prices soared 9.6%. The steep slowdown in house price growth adds to other recent signs that the property market is slowing down after years of rapid activity.
Upcoming fundamentals: ECB's Weidmann speaks as economists await QE comments
Throughout the next 24 hours the core focus will again to turn to American market session, where we are going to watch a number of important fundamental indicators that are due. In the meantime, the only vital economic event in the Euro zone, which can move the common currency, is a speech by the president of Germany's Bundesbank Jens Weidmann. He is scheduled to talk at 12:40 GMT in Liechtenstein. Usually German members of the ECB's governing bodies are considered to be those who are voting against more dovish monetary policy decisions. They are normally maintaining a more hawkish view on inflation and economy and, therefore, the policy stance. Today it will be important to hear any of his thoughts on the matter of additional stimulus in the foreseeable future.
EUR/USD eases below 1.1220, sets eye on 1.1145
Inside the current triangle pattern (boundaries at 1.1310 and 1.0860), EUR/USD is now descending to the South. Yesterday it slid below the weekly PP, monthly R1 and 23.6% Fibonacci retracement of this month's earlier climb. The primary target is the 38.2% retracement at 1.1145, followed by the 20-day SMA ten pips from below. The ultimate long-term bearish goal seems to be the pattern's lower bound at 1.0860. However, daily indicators continue supporting the bulls. Moreover, the 55-day SMA is going to breach the 200-day SMA to the upside soon, which is going to be a positive sign.Daily chart
Today is the crucial time from the perspective of the 1H chart. EUR/USD lies just within nine pips from the 200-hour SMA (1.1194). We are awaiting some bullish activity here, but it is not guaranteed. A climb would expose the 1.1450 cap represented by the March uptrend and September 2015 peak. In the meantime, the short traders are intended to close the price below 1.1150 (two-month downtrend).
Hourly chart
Pending orders slump below 50%, sentiment unchanged
About 60% of all OANDA positions on the EUR/USD cross are betting the common European currency is going to retreat versus the Buck, unchanged on a daily basis. As for SAXO Bank, here the shorts' advantage tends to remain much wider at 67% against the 33% share for the bullish side.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy market participants are much more bearish on the Euro this week
At the moment of writing, we could see bulls trying to refresh the recent high. Traders, however, does not believe the pair will continue its appreciation, as only 37.5% of votes are bullish, while consensus forecast stands at 1.12. The overall market sentiment is bearish (62.5%), while trader rokasltu supports this forecast and believes that "EUR/USD took upward direction after FOMC statement, but faced resistance above 1.13. In my opinion, as monetary policy is quite clear at the moment, the EUR/USD's movements might be limited for a while. I expect rate to go downward a little during this week."
More on the negative side of traders' opinions, Jignesh assumes that "the FED caused the USD to nose dive once again, but a common characteristic of the Central Bank is to leak tidbits of information after the fact that conflict information contained in the original press conference. We may see individual members expressing different views, and a bit of a pull back in the pair early in the week, however, with Non Farm payrolls next week, dips in the pair should be supported."