- 59% of all SWFX positions are short
- Pending orders are bearish in >60% of all cases
- Nearest resistance for pair is 1.15 (weekly R1; October high)
- Fresh weekly technical indicators turned mixed, daily studies are bullish today
- Economic events to watch over the next 24 hours: Euro zone Unemployment Rate (Feb) and PPI (Feb); US Factory Orders (Feb) and Labour Market Conditions Index (Mar); FOMC Members Rosengren, Evans and Kashkari Speak
The Euro zone manufacturing activity rose more than expected in March, suggesting that fragile recovery remained on track despite a weaker demand from China and other developing economies. The Euro zone's manufacturing PMI climbed to 51.6 last month, up from 51.2 reported in February. However, prices for factory made goods dropped, Markit reported, plunging in March at the steepest pace since 2009 as companies lower prices in response to weak demand for their products. The slide in prices underscores challenges the ECB still faces in meeting its goal of bringing consumer-price inflation in the Euro zone back up to just under 2%. Consumer prices in the 19-nation bloc dropped on the year in March, albeit at a slower pace than in the preceding month. Annual inflation came in at minus 0.1% in March, compared with minus 0.2% in February. While manufacturing activity surprisingly accelerated in the Euro zone's number one economy, in France manufacturing arena cooled in March and ended its six-month period of growth. Germany's final manufacturing PMI rose to 50.7 during last month, up from 50.5 seen in February. At the same time the French manufacturing PMI slid to 49.6 in March, down from 50.2 seen in February and marking the lowest since August last year.
Even though the US economy added more jobs than expected in March, the nation's unemployment rate climbed. According to the US Department of Labour, non-farm payrolls surged 215,000 last month, following the upwardly revised reading of 245,000 in February. Nevertheless, the unemployment rate inched up slightly to 5%, driven up by a larger number of people looking for work. In January the jobless rate declined below 5% for the first time since 2008 and had remained there for the first two months. In addition to that, average hourly earnings rose by 0.3% last month, overshooting analysts' expectations, and were up 2.3% over the year ending in March. A separate report showed US manufacturing grew in March, ending a five-month stretch of declines in factory activity. According to the Institute for Supply Management, its manufacturing index climbed to 51.8 last month from 49.5 in February. The rebound indicated that US factories are adapting to the turmoil overseas, where a stronger US Dollar and slowing economies in China, Japan and elsewhere have undermined sales. Nevertheless, the details of the report appeared to be somewhat uneven. New orders and production improved, but the measure of employment at manufacturers declined.
Upcoming fundamentals: European unemployment to stay above 10%
Initially scheduled for Friday, the unemployment rate data release for the Euro zone was later shifted three days later to the beginning of this week. The figures are up at 10:00 GMT and will likely show that the percentage of people out of work has been unchanged at 10.3% in February. However, it should be pointed out that in the past five months this indicator has constantly posted better than expected results. Throughout the US session, factory orders are due to come out at 14:00 GMT. In January they surged by 1.6%, while in February economists foresee a negative setback of 1.5% on a monthly basis.
EUR/USD prepares for gains, FOMC minutes loom
Friday's wide trading resulted in no gains for both sides of the market. EUR/USD attempted to grow to 1.1440 and decline as low as 1.1340, but ultimately a small green candle confirmed that the pair added only 11 pips over the day to end it near 1.1389. Odds are biased in favour of the bulls this week, as the weekly R1 (1.15) along with the October 2015 peak are opened to testing. There are no intermediate resistances on the pair's way up. Moreover, the aggregate signal provided by daily technical indicators is positive for the Euro zone's currency.Daily chart
Also, based on the one-hour chart the outlook remains bright for the EUR/USD pair. It seems to have confidently consolidated above the 200-hour SMA, currently at 1.1254. The spot this morning has rested at 1.1383. The primary target is the 1.1459 mark, represented by the September high of the previous year. This one is succeeded by the October 2015 peak at 1.1495, and there we expect the number of bearish bets to rise.
Hourly chart
Sentiment at 2-week low, orders preserve short bias
Assuredly more than 70% of SAXO Bank clients are ready to sell the Euro against the Dollar. Alongside, advantage of OANDA's short participants widened further over the weekend. There are as many as 68% of bearish transactions, while the bulls are now holding only 32% of all trades.