- Number of bearish positions increased from 58% to 59%
- Pending orders remain bearish, but difference from bulls has narrowed down
- Growth beyond weekly PP (1.1327) indicates there are more expected gains on the table
- There is a mixed aggregate signal coming from daily technical indicators
- Economic events to watch over the next 24 hours: ECB President Draghi Speaks; US MBA Mortgage Applications, Existing Home Sales (Mar) and Crude Oil Inventories (Apr 15)
German economic sentiment improved in April, beating expectations, according to ZEW survey. Economic sentiment continued to advance, improving for the second consecutive month from the lowest level since October 2014 that was registered in February. The ZEW Centre for Economic Research report said that the index rose to 11.2 and gained 6.9 points compared to the previous month exceeding expectations of 8.0. Meanwhile, the index of Euro zone economic sentiment unexpectedly soared to 21.5 in April from 10.6 a month earlier, settling well above forecasts for a reading of 13.9. A lot of analysts assume that the rise of sentiment index confirms that the German economy has continued its solid growth performance. Domestic demand, and in particular private consumption, has become an important growth driver. Looking ahead, they believe the economy should continue its current positive, though not breathtakingly strong, momentum next year. Nevertheless, the data does not change the fact that Germany's exports have been badly affected by the downturn in emerging markets. Thus, for its part, ZEW says that assessment of the current situation in Germany is worsening. In other words, Germany's past days are likely to be better than its near term outlook.
Bank of England Governor Mark Carney took a chance to voice a fresh set of concerns about threats the UK economy may face should voters choose to exit from the European Union. In testimony to lawmakers in the House of Lords Carney said that a vote in favour of leaving the EU could result in "an extended period of uncertainty about the economic outlook" in the UK, with the potential to hurt trade, investment and growth. It could also undermine asset prices and the supply of credit in the economy, as well as make it more expensive for Britain to finance the gap added. Carney has previously described Brexit as the main domestic risk to Britain's financial stability. The Governor also stressed the benefits for Britain's economy from its open trading relationship with the EU, drawing criticism from some pro-Brexit lawmakers. At the same time, Michael Gove, a senior government minister who supports Brexit, described a list of potential gains to the UK of leaving the bloc, including reducing red tape and savings from no longer having to pay into the EU budget. Gove added that the UK would also be able to freely pursue its own free-trade deals with the rest of the world and could be confident the EU would still want to trade freely with Britain, given that the UK was the destination for some 300 billion pounds of EU exports in 2014.
Upcoming fundamentals: Draghi speaks before tomorrow's policy meeting
The markets are going to have a look at the speech that will be given by ECB President Mario Draghi later on Wednesday. He is expected to talk at 10:00 GMT at the ECB Generation Euro competition in Frankfurt, Germany. Given that tomorrow the central bank holds a scheduled monetary policy meeting, investors will try to find any indications about direction the ECB's stance this month and in the foreseeable future. As for the US session today, the weekly change in applications for mortgage loans for the period ended April 15 will be known at 11:00 GMT, while existing home sales for March are due at 14:00 GMT. Economists forecast a 4% growth in sales, which, however, will follow a sharp 7.1% plunge in the previous month.
EUR/USD breaches weekly PP to boost outlook
Even though the volume of trading for the EUR/USD cross remained broadly flat for a third day on Tuesday, it did not stop the bulls from pushing the pair up by 46 pips. The Euro successfully dealt with the weekly pivot point, thereby switching attention to the 1.1460 mark. Here the bulls will find the September 2015 peak and the current April high along with the Feb-April uptrend line. Medium-term dips will be consequently allowed to extend down to the 1.12 mark where the nearest massive cluster of supports consists of the monthly pivot, weekly S1 and 55-day SMA.Daily chart
Totally bearish expectations have not come into force over the preceding five-day period, because in the 1H chart EUR/USD managed to retest the 200-hour SMA, currently at 1.1338. The spot above this mark can potentially allow for a climb towards the aforementioned September 2015 peak, because at the moment it seems to be the only reliable bullish resistance level in the short-term.
Hourly chart
SWFX sentiment changed for the first time in six days
Already less than 40% 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 more than 60%. 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.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members are quite divided on this week's perspectives of the pair
This week sentiment deteriorated further, as only 45% of participants in our quiz expect the Euro to rebound. Jignesh says "Three times a charm for Draghi & the ECB. Though the EUR/USD remains in a bullish trend, this week the ECB will hold a press conference. In the past two meetings, Draghi's words had the pair move higher after the fact, likely an unintended reaction. With the Euro nearing highs, Draghi will once again bring out his best jawboning skills to the table to try and talk the pair lower."
In the meantime, there are traders who suggest there is room for gains of the cross. For instance, PisakJanos thinks that "as the support at 1.124 level has been reached, I am expecting a recovery of the pair, sustained by the policy of the FED."