- More than 60% of SWFX traders are short on EUR vs USD
- Pending orders retreated since yesterday, most of them bet the Euro will diminish
- Intraday dips to meet the weekly PP at 1.1326, bullish eye is on 1.15 (October high)
- Both daily and weekly technical indicators foresee EUR/USD's rally
- Economic events to watch over the next 24 hours: German Current Account and Trade Balance (Feb); French Industrial Production (Feb); US Wholesale Inventories (Feb); FOMC Member Dudley Speaks; Swiss CPI (Mar)
Fed Chair Janet Yellen said that the US central bank did not make a mistake in hiking interest rates in December, a move that was followed by massive turbulence in financial markets and further weakening of the global economy. Yellen said that as the US economy remains on a solid ground with some signs of inflation. Moreover, seven years after the severe financial crisis, the US labour market was now close to full employment, arguing that inflation would not be held down much longer by a strong US Dollar and low oil prices. Therefore, the Fed remains on track for further interest rate increases. The Fed lifted its benchmark policy rate in December, the first increase in nearly a decade, to between 0.25% and 0.5%. A number of private economists believe the next hike will not occur until June. The number of Americans who applied for new jobless benefits declined last week, the latest sign of a strong labour market. Initial claims for unemployment benefits, a proxy for layoffs across the US economy, declined by 9,000 to a seasonally adjusted 267,000 in the week ended April 2, according to the Labor Department. Last week was the 57th consecutive week that initial jobless claims remained below 300,000, extending the longest streak below that threshold since 1973.
Japan posted a 20th current-account surplus in a row, helping an economy that has been struggling to recover from a contraction in the final quarter of 2015. Japan's broadest measure of trade with the rest of the world grew more than four-fold to 2.43 trillion yen in February, according to the Ministry of Finance. Export receipts increased from 5.35 trillion yen in January to 5.64 trillion yen in February, while import payments declined from 5.77 trillion yen to 5.22 trillion yen. A combination of cheap energy imports, higher income from investments abroad by Japanese companies and an influx of foreign tourists have all contributed to the surplus. A recent strength on the Yen, which has gained about 11% this year threatens to erode some of the benefits exporters have received from the currency, and make Japan more expensive for tourists from abroad. The Yen's strength has fuelled speculation that policy makers will intervene in currency markets to bring the currency back down, yet Prime Minister Shinzo Abe has ruled out such a move. However, the BoJ has other tools on hand to help bring the currency down, including expansion of the Qualitative and Quantitative Easing programme and cutting interest rates further into negative territory
Upcoming fundamentals: US wholesale inventories to drop; Fed's Dudley speaks on economy
Friday is going to be a busy day for both European and American market sessions. German trade data is first on the economic calendar, but it will have been released by the time this report is published. French industrial production data is out at 6:45 GMT. Economists foresee a monthly loss of 0.4% in February, which will follow a substantial 1.3% climb in January. Swiss inflation data will be due at 7:15 GMT, as analysts suspect the consumer price growth in this country will remain negative at -0.9% on a yearly basis. In the US, the New York Fed President William Dudley is set to talk about the economy at 12:30 GMT, while wholesale inventories statistics is out at 14:00 GMT. Inventories are an important signal of future business expenditures, meaning negative readings are considered to be bullish for the currency.
EUR/USD ends another session in limbo
Since last Friday neither bulls nor bears have managed to take market in hand. Yesterday was a turbulent day, as the spot ranged from 1.1340 to 1.1455. However, ultimately the pair has been barely down by 22 pips over the whole day. Fresh daily and weekly technical indicators estimate a bullish correction. We tend to maintain a positive outlook as well, because there are many obstacles to limit a slump of the Euro and the first one is the weekly PP at 1.1326. The primary resistance we are looking at is the October peak at 1.15, which is boosted by the Bollinger band and weekly R1.Daily chart
There is a very tight spread between the spot market price and the 200-hour SMA at the moment. Risks are therefore biased to the upside, also because the moving average is reinforced by the trend-line connecting lows of the March 31-April 7 period. We would allow for a rally up to 1.1460, as there EUR/USD is going to face another uptrend (April 1-7) and the September 2015 peak.
Hourly chart
Sentiment at 8-week low, orders slide down
A little bit more than 35% of all OANDA market participants, who are trading the EUR/USD cross, are bullish on the single European currency. It leaves the bearish portion at 65%. Alongside, more than seven out of ten SAXO Bank clients continue preserving a bearish view towards the observed currency pair.