- 58% of all positions are short
- More than 50% of all pending commands are set to get rid of the Euro
- A strong resistance bunch has emerged between 1.1460 and 1.1495, posing challenge for bulls
- Both daily and weekly technical indicators foresee EUR/USD's rally
- Economic events to watch over the next 24 hours: French CPI (Mar); Euro zone Industrial Production (Feb); US Retail Sales (Mar) and PPI (Mar)
The heads of two regional Federal Reserve banks backed an interest rate increase ahead of the Fed's March meeting as an strengthening economy added to sentiment to tighten monetary policy. The heads of the Richmond and Kansas City Fed supported a quarter point lift in the main lending rates for banks "in light of continued improvements in labour market conditions and expectations that inflation would rise," according to minutes of the Fed's March meeting. Recent signs that US inflation is accelerating lay the groundwork for the US central bank to hike interest rates, Richmond Fed President Jeffrey Lacker said. The Fed should proceed with its earlier plan to raise interest rates four times this year. The Richmond Fed president said the Fed has often reacted to financial market developments that turned out, with hindsight "to be false signals." Lacker added that the negative financial market developments that led the Fed to pause in March have largely reversed. Lacker is a non-voting member of the FOMC this year. He is seen as one of the more hawkish Fed officials, having pressed the US central bank to hike interest rates last fall. Minutes of the last Fed policy meeting showed a growing divergence in views over when to hike rates next. Though an increase is considered unlikely when the Fed meets this month, steady improvement in the job market and strengthening growth could set the stage for a hike in June.
Australians were less confident about the economic outlook and their family finances in April. The survey of 1,200 respondents by the Melbourne Institute and Westpac Bank showed the consumer sentiment declined 4% to 95.1 this month from 99.1 in March, leaving the measure 1.1% down on April last year at 95.1, meaning pessimists outnumbered optimists. The sub-index tracking assessments of ‘family finances compared to a year ago' decreased 3.8%, while the component tracking expectations for ‘family finances over the next 12 months' fell by 6.6%. Australians were also worried about the economic outlook, with the component tracking views on ‘economic conditions over the next 12 months' sliding 5.5% and the component tracking expectations for ‘economic conditions over the next 5 years' slipping 5.9%. The deterioration in consumer sentiment underscores an increasing divergence between how businesses and consumers view the outlook for the economy. A similar survey of the business sector showed that Australian firms viewed business conditions as being at their best level since 2008 last month. The National Australia Bank Business Confidence Index surged from 3 in February to 6 last month, while the NAB Business Conditions Index soared 8 to 12, the highest reading since the global financial crisis.
Upcoming fundamentals: French inflation expected to come out negative
The first important European fundamental data release (6:45 GMT) is going cover consumer prices in France, the region's third and Euro zone's second largest economy. The annual CPI is estimated to be confirmed at -0.2% in March, even though on a month-to-month basis the gauge is forecasted to surge by 0.7%. The Euro zone's industrial production for February is due at 9:00 GMT, as economists project a drop of 0.3% on a monthly basis. However, today's figure will follow a 2.1% climb in January.
EUR/USD: another wide range with no results
Eight consecutive days of neither bullish nor bearish advantage has only ended with emergence of a firm uptrend resistance line for the EUR/USD currency pair. It is now connecting the February high with local April peaks at 1.1460. Despite indecisive trading, it seems that the risks are skewing back to the downside. The key support area to watch is 1.1329/09, where the first weekly demand line is strengthened by the 20-day SMA. Success here would set eye on the 1.12 mark (monthly PP, weekly S3), followed by the March 24 low at 1.1143.Daily chart
For now the pair has already tested the 200-hour SMA in the 1H chart. Nevertheless, the March 31-April 7 lower uptrend located at 1.1353 remains largely intact. Failure here may have serious consequences for the bulls, because they will start feeling greater pressure from the side of bears and the attention will turn to much lower levels, namely 1.12 and below.
Hourly chart
SWFX sentiment becomes more optimistic, as orders tumble
OANDA market sentiment on the EUR/USD currency pair has picked up over Monday. Still, only slightly more than 36% (35% yesterday) of all their positions are bullish. Meanwhile, SAXO Bank clients lost the battle to safeguard a formidable psychologic distribution of long-short positions at 30-70%. Wednesday morning less than seven out of ten traders of SAXO Bank are keeping the bearish positions.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members expect a rally of EUR/USD this week
This week the sentiment among Dukascopy traders ameliorated to approach average level of several last weeks, as now 61% of them are waiting for the pair to advance from Monday to Friday. Average market expectation, however, moved slightly up to reach the 1.14 level on Friday, April 15. Moreover, 45% of all votes are set in range between 1.13 and 1.145, meaning that the pair is likely to hover around current levels for some time in the future.
One of the opinions about this week's development of the pair is provided by Besim76, who says that "EUR/USD gained to close over the 1.14 level seeing a gain of 0.13% on the week as the US Dollar continued to show weakness. The Euro may be a bit more susceptible to weakness if risk markets rally (the portfolio re-balancing channel effect is still in play). However, the sensitivity the Euro will have to gains by equity markets and lower core sovereign yields may be limited thanks to Fed Chair Yellen's heightened dovish posture."