- Six out of ten SWFX traders are short on EUR vs USD
- Pending orders continue to be marginally bearish
- Nearest resistance for this pair is 1.15 (weekly R1; October high)
- Daily technical studies are bullish today
- Economic events to watch over the next 24 hours: Euro zone Services PMI (Mar) and Retail Sales (Feb); US Trade Balance (Feb), Services PMI (Mar), JOLTS Job Openings (Feb) and ISM Non-Manufacturing PMI (Mar)
Unemployment across the Euro zone declined slightly in February, but the gauge remained well above the pre-crisis level of 7.5%. According to Eurostat, the jobless rate in the 19-nation bloc slid to 10.3% following an upwardly revised 10.4% recorded in January, falling to the lowest level since August 2011. Although the unemployment rate improvement is encouraging, sharp disparities remain across the region with Spain and Greece suffering from unhealthy high unemployment rate, which exceeds 20%. At the same time, the lowest level of joblessness was reported in Germany at 4.3% and the Czech Republic at 4.5%. In February, Euro zone companies added 39,000 jobs to their payrolls, pushing down the number of people out of work to 16.63 million. Euro zone job creation is still hindered by a fragile economic recovery, which according to the European Central Bank is likely to continue in the months ahead, albeit "not as fast as hoped." A separate report showed investor morale improved in April. The Sentix index climbed to 5.7 for April, up from 5.5 in March. Economists, however, had predicted a stronger upturn to 7.0. The current conditions sub-index decreased to 6.0 from 8.3 in March, while expectations sub-gauge jumped to 5.5 from 2.8.
The Reserve Bank of Australia kept the official cash rate at a record low 2% for a 10th consecutive meeting, but warned that the recent strong rise in the Australian Dollar could "complicate" the economy's transition. Australia's Trade-Weighted Index recently hit the highest level in nine months, with the Aussie Dollar also reaching a June-2015 high versus the US counterpart in March. However, RBA Governor Glenn Stevens said low inflation would facilitate another rate cut if that were necessary. In the final quarter of 2015 Australia's consumer inflation climbed an annualized 1.7%, the sixth straight quarter that headline inflation was below the RBA's 2-3% target range. March-quarter inflation data are due on April 27. Bets on future rate cuts declined slightly, with markets pricing in a 29% possibility of a cut at the May meeting, moving up to a 58% chance in July. A report of the Australian Bureau of Statistics showed Australia posted a wider-than-expected trade deficit in February. The national trade deficit surged to $3.41 billion in February after seasonal adjustments, above the upwardly-revised $3.156 billion shortfall in January and expectations for a drop to $2.5 billion. Exports fell 1.0% in February, while imports remained unchanged. Falling commodity prices, a rising Australian Dollar, and weakness in China's demand are putting pressure on Australia's trade accounts.
Upcoming fundamentals: Services sector activity in Europe/US
On Tuesday a number of European countries, the UK and the US are publishing PMI indicators for services sectors of their economies. Contrary to manufacturing, this industry is managing to hold ground amid robust domestic demand, which is largely resilient to weakness abroad. Markets expect that Spanish (7:15 GMT) and Italian (7:45 GMT) data will be revised to the upside today, while French and German figures should remain steady. As a result of that, the pan-European services PMI is expected to be reviewed upwards to 54.1 points from 54 reported in the preliminary publication. As for another piece of European data, at 9:00 GMT the retail sales for February are due. Analysts forecast that the volume of retail trade in the common currency area was unchanged on a monthly basis and we should await a slowdown of growth to 1.9% year-on-year.
EUR/USD remains uplifted near February peak
The most traded FX cross refrained from kicking off a recovery in the direction of the 1.15 mark yesterday, as traders are waiting for the FOMC minutes tomorrow and maintaining the wait-and-see mode. Nevertheless, the medium-term projection is the same as 24 hours ago, as we see more upside risks to the price. The closest resistance is the October 2015 peak and the weekly R1. On the other hand, any decline under the weekly pivot at 1.1326 may potentially expose the pair to heavier losses in the direction of the 1.12 area (monthly PP/20-day SMA/weekly S1).Daily chart
We are not changing our bright outlook for the Euro, according to the one-hour chart for its cross with the Greenback. As the 200-hour SMA continues to sharpen the upward slope, the upside risks for the pair are on the rise. Hence, the September 2015 high at 1.1459 is not out of reach any more.
Hourly chart
Sentiment at 12-day low, orders preserve short bias
71.50% of SAXO Bank clients are ready to sell the Euro against the Dollar today. Alongside, there are as many as 68.4% of bearish transactions in the OANDA market, while the bulls are now holding only 31.6% of all trades.