- For a fifth trading day 58% of all positions are short
- Pending orders are deeply pessimistic on the pair (around 60% bearish)
- Key resistance is weekly PP at 1.1327; ST losses should be capped by monthly PP/55-day MA at 1.12
- There is a mixed aggregate signal coming from daily technical indicators
- Economic events to watch over the next 24 hours: Euro zone Current Account (Feb); German ZEW Economic Sentiment (Apr); US Housing Starts and Building Permits (Mar)
New York Fed President William Dudley said US economic environment is "mostly favourable", but the US central bank remains cautious in hiking interest rates as threats loom. Dudley reiterated he was confident that too-low inflation would climb to a 2% target over the next few years, with "economic conditions have finally warranted the start of U.S. monetary policy normalization." The policy maker repeated his view that the Fed should take a gradual and cautious approach to monetary policy tightening amid significant uncertainties and headwinds to growth stemming from the financial crisis, which have not fully abated. At the same time, Boston Fed President Eric Rosengren said the US central bank is set to raise interest rates more quickly than investors currently expect. Rosengren said US inflation was now "much closer" to the central bank's goal, downplayed weak growth in the beginning of the year, and said the economy is "fundamentally sound." Rosengren, a voter this year on the Federal Open Market Committee, made his remarks eight days before the FOMC is scheduled to meet to voice officials' views on the economy and set the benchmark federal funds rate. Some policy makers have said they do not anticipate a move, and investors put the chance of an April rate hike at zero. In fact, market participants do not expect another rate increase until next year.
The Reserve Bank of Australia voiced its discontent with the Australian Dollar's recent appreciation, which puts economy's' transition towards non-mining activity at risk. The Aussie Dollar has gained more than 12% in the past three months, and is the best performer after Canada's namesake among a group of 10 major currencies, supported by lower expectations of US monetary policy tightening and recovering commodity prices. However, RBA policy makers noted that "the recent rebound in commodity prices, even if sustained, was unlikely to lead to any material change in mining investment over the next couple of years." The central bank, in minutes of its April 5 meeting where interest rates were left unchanged at a record-low 2%, said that persistently low inflation would provide room to ease monetary policy further, in case a necessity arises. The RBA noted the economy's 3% growth in 2015 was better than expected and "broadly consistent" with last year's strengthened jobs market. It said recent information suggested the economy "had continued to grow at a moderate pace" in early 2016. The RBA meeting minutes stated that the bank expected inflation in Australia to remain low over the next year or two, partly due to the impact of the highest exchange rate. A growing number of economists think the RBA will remain on hold throughout 2016.
Upcoming fundamentals: Germany's economic expectations to rise in April
Analysts suggest that the ZEW economic sentiment indicator for Germany, released today at 9:00 GMT, will reveal improving expectations among experts for the horizon of the next six months. The indicator is set to increase from 4.3 points in March to 8.0 points this month. Evaluation of the current situation is expected to stay largely flat at 50.8 points in April against 50.7 in March. In the meantime, US housing data is due at 12:30 GMT later today. Housing starts are set to decline by 1.1% in March on a monthly basis, after a 5.2% spike in the preceding monthly period. Building permits, which can be considered as a future indicator for housing construction activity, are forecasted to add 2% in March after a 3.1% decline in February.
EUR/USD's advance contained by weekly PP
As expected, EUR/USD's development, prior to the ECB event later on Thursday, remained relatively calm on April 18. Yesterday the added value amounted to only 12 pips, while the similar situation being observed on early Tuesday morning. We see the weekly pivot as the first noticeable resistance at 1.1327 and in the short-term the pair is likely to terminate around here. We would allow for a medium-term slippage in the direction of 1.12, where the monthly pivot coincides with the 55-day SMA and weekly S1 for the moment.Daily chart
The gap between the 200-hour SMA and the spot price is narrowing down, for now amounting to only seven pips. If the bulls are decisive enough and push EUR/USD beyond 1.1342, then we would forecast a leg up to 1.1460 in the mid-term. However, a failure would risk beginning a massive sell-off of the pair, with nearby demand resting at 1.1143 (March 24 low), followed by the March 16 low at 1.1056.
Hourly chart
Market sentiment steady for 5 days, orders diminish
About 40.5% of all OANDA market players are betting the Euro is going to appreciate at the expense of the Dollar, which leaves the bearish side with an overall confident majority of 59.5%. In addition, more than seven out of ten SAXO Bank traders are again holding short positions on EUR/USD and this sentiment is providing no signs of improvement for the moment.