- For a fourth trading day 58% of all positions are short
- Bullish pending orders are still short of an overall majority (45-47% depending on range from spot)
- The main resistance for Monday is weekly PP at 1.1327, as any ST losses should be capped by 1.12
- There is a mixed aggregate signal coming from daily technical indicators
- Economic events to watch over the next 24 hours: FOMC Members Dudley, Kashkari and Rosengren Speak
US industrial production declined more than expected in March as output dropped broadly, the latest sign that economic growth faltered in the first quarter. Industrial output fell 0.6% last month following a downwardly revised 0.6% decrease in February, according to the Federal Reserve. Industrial production slipped at an annual rate of 2.2% in the first quarter. The report joined data on retail sales, business spending, trade and wholesale inventories in indicating that economic growth slowed at the turn of the year. Growth estimates for the first quarter are as low as a 0.2% annualized rate. The world's number one economy grew at a 1.4% rate in the fourth quarter. However, given a strong labour market, the slowdown in growth is likely to be temporary. A separate report showed US consumer confidence unexpectedly declined in early April for the fourth straight month, as concerns about surging gasoline prices and the broader economy weighed on sentiment. The Thomson Reuters/University of Michigan preliminary Consumer Confidence Index slid to 89.7 points in April, compared with the final 91.0 reported in March, when it had dipped to a fresh five-month low. The Current Economic Conditions sub-index ticked down to 105.4, down from 105.6 in March, while the Index of Consumer Expectations plunged to 79.6 in April, sharply lower than 81.5 reported previously.
New Zealand inflation rose in the first quarter, recovering from the lowest level in 15 years, but remained below the range the Reserve Bank of New Zealand targets, providing the central bank with room for further interest rate cuts. New Zealand's CPI climbed 0.2% in the January-March period, Statistics New Zealand reported, coming in stronger than the median forecast of zero change and much higher than the 0.5% decrease seen in the previous quarter. The main contributor to the surge came from an increase in an excise duty, with cigarette and tobacco prices advancing 9.4% over the reported period, making a 0.25 percentage point contribution change to the headline measure. In addition to that, price increases for strawberries, kiwifruit, and oranges helped lift fruit prices 8.2%. Tepid inflation means there is little hurdle to Governor Graeme Wheeler lowering the official cash rate if needed after cutting it to a record-low 2.25% in March. Market participants are betting on lower borrowing costs as falling oil prices and the New Zealand Dollar's 6.5% gain in the past three months threaten to delay the return of the nation's inflation to the middle of the RBNZ's 1-3% target range. The central bank will review the official cash rate on 28 April.
Upcoming fundamentals: No Euro zone data awaited on Monday
Trading is expected to be completely driven by technicals over Monday's European session, given that there are no fundamentals expected from the region. On the statistical front, the US session is going to be quiet as well. However, some Fed policymakers are set to speak throughout the day. Markets have already become used to many remarks made by the FOMC members, and this will risk their general level of importance. New York, Minneapolis and Boston Fed presidents are taking stage later in the day at 12:30 GMT, 14:00 GMT and 16:30 GMT, respectively.
EUR/USD consolidates before ECB this week
On Friday the volume of trading fell to the lowest level since March 28, while the Euro is getting ready for the ECB meeting later in the new week. Fluctuations of the EUR/USD pair are insignificant, with major caps provided by the 1.13 mark and the weekly pivot point above at 1.1327. From the downside, EUR/USD will see rising demand near 1.12 where the monthly pivot is boosted by the weekly S1 and the 55-day SMA. As for the daily technical indicators, they are also mixed on the matter right now.Daily chart
According to the short-term chart, the bearish pressure on EUR/USD is going to increase in the days to come. The 200-hour SMA, currently at 1.1350, is gradually descending in the direction of the spot price of 1.1287. For now the base scenario continues to suppose there is a good chance of a selloff down to 1.10, where the pair will hit the downtrend connecting the Feb high and the March 10 high. On the other hand, by violating the moving average, the bulls will get a chance to build a leg up to 1.1460 (September 2015 high) in the mid-term.
Hourly chart
Market sentiment steady for 4 days
Bright time for the EUR/USD currency pair in the OANDA market failed to be extended beyond one trading day. Over Saturday-Sunday this pair's sentiment has become the most negative again, as almost 60% of all positions are put short on EUR vs USD. On top of that, 68% of all SAXO Bank clients continue betting the 19-nation currency will diminish on the back of stronger US Dollar.