- SWFX sentiment is bearish in 55% of all cases (56% on Friday)
- Pending orders remain 52-55% bullish on the European currency
- Key bearish target is 38.2% retracement at 1.1145, analysts start looking at US NFP numbers due this Friday
- This week the pair is going to appreciate, according to aggregate weekly technical indicators
- Economic events to watch over the next 24 hours: US Personal Income (Feb), Personal Spending (Feb), International Trade in Goods Balance (Feb) and Pending Home Sales (Feb)
New orders for long-lasting US manufactured goods dropped in February for the third time in four months, as the sector continued to struggle with the lingering effects of a strong US Dollar and lower oil prices. Bookings for goods meant to last at least three years plunged 2.8%, following the 4.2% gain, the Commerce Department reported. Categories reflecting business investment were broadly sluggish, indicating that American companies remain cautious about spending. New orders for nondefense capital goods excluding aircraft, a proxy for business spending on equipment, dropped 1.8% in February after a 3.1% increase in January. Meanwhile, a separate report of the Labor Department showed the number of Americans applying for unemployment benefits climbed modestly last week, while revisions for prior weeks indicated the labour market was much stronger than previously estimated. Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 265,000 for the week ended March 19. The prior week's claims were revised to show 6,000 fewer applications received than previously reported. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, nudged up 250 to 259,750 last week.
The UK retail sales declined less than expected in February after increasing the most in more than two years in January due to post-Christmas sales. Retail sales volumes fell 0.4% last month following the 2.3% surge in January, according to the Office for National Statistics. Economists, however, had predicted a 0.7% decline. Compared with a year earlier, sales in February soared 3.8%, slowing from a growth rate of 5.4% in January. British consumer demand has been sturdy and has supported economic growth over the past couple of years, boosted by record employment, modestly increasing wages and near-zero inflation, all of which have provided households with more disposable income. Last month the BoE predicted household consumption would increase by 2.75% this year, the same as in 2015 and faster than the economy as a whole would expand. However, there have been some signs of a slowdown. Figures from the British Retail Consortium showed annual growth in retail spending decreased to 1.1% in February from 3.3% in the prior month. Moreover, ONS figures showed the value of retail sales rose by 1.4% on the year in February. The ONS said sales in the three months to February had suffered due to the steepest decline in clothing sales since December 1990, which plunged by 3.4%.
Upcoming fundamentals: Americans expected to earn and spend more in February
One can hardly believe that medium-importance statistical data is going to somehow change sentiment among currency pairs and therefore move the market. Today the European session is completely closed, while US statistics will include personal income and spending for February at 12:30 GMT. Both are set to grow during the reported month, after a decent increase in January. Alongside, pending home sales for February are out at 14:00 GMT and are estimated to increase by 1.4% on a monthly basis after a 2.5% decline in January.
EUR/USD: Friday's range bound outlook unchanged
Trading volume on Friday dropped to even lower levels than during the pre-Christmas season, but it failed to raise volatility of the EUR/USD cross. It is broadly flat between 1.1160 and 1.1180, meaning the short-term forecast has not changed very much over the weekend. We see subdued trading activity on Monday as well, due to Bank holidays in many countries. The key primary support is the 38.2% Fibonacci retracement of the earlier March rally at 1.1145 and the 20-day SMA at 1.1141. A fall below here is unlikely, as the weekly S1 is offering another demand above 1.11.Daily chart
It is surprising, how the EUR/USD currency pair is managing to maintain a rather tight spread and trade between the 200-hour SMA (1.1210) and the two-month downtrend (1.1124) for a fourth day in a row. A spike above the former will re-actualize a climb toward the September 2015 high at 1.1459. On the other hand, by plummeting under the downtrend the pair will start aiming at the 1.0850 area (two January-March mild uptrend lines).
Hourly chart
Sentiment and orders steady during holidays
Expectations concerning future development of the EUR/USD cross have improved additionally by one and a half percent in the OANDA market, where 43.50% of traders are now foreseeing the pair's advance. Alongside, SAXO Bank sentiment is more or less steady at 35-65% for the bulls and bears, respectively.