EUR/USD closes below 1.13 after bullish rally

Source: Dukascopy Bank SA
  • 57% of all SWFX market positions are short
  • 55/52% of pending orders (50/100-pip ranges) are long
  • Bearish Fed will help bullish traders in eyeing weekly R1 at 1.1341; tough support still placed at 1.12
  • Daily technical indicators are neutral ahead of Fed meeting
  • Economic events to watch over the next 24 hours: Spanish Retail Sales (Mar); US International Trade Balance (Mar) and Pending Home Sales (Mar); FOMC Interest Rate Decision and Rate Statement

© Dukascopy Bank SA
All data but US Services PMI was largely disappointing on Tuesday, taking into consideration major regions worldwide. Europe has not been the largest data generator, with only some speeches of ECB officials included in the economic calendar. As for other countries, the US statistics on orders for durable goods showed they increased noticeably less than expected in March or even declined on the core basis. It indicates that conditions in US manufacturing remain difficult amid strong value of the Buck and weakness overseas. The Euro rebounded against the US Dollar by 0.26%, adding value for a second straight day. EUR/JPY, however, was the best performing currency with a jump of 0.37%, as the Yen attempted to correct lower in the run up to tomorrow's meeting of the Bank of Japan. Due to a rise in oil prices, all commodity-dependent components were able to add some moderate value against the Euro. EUR/NZD led the losses among them to slump by 0.37%. EUR/GBP was down by 0.41%, with the Sterling sweetening amid broadly weak US statistics and more optimistic expectations for the EU referendum due on June 23.

Australian consumer prices fell for the first time since 2009 last quarter, opening the door to a potential interest rate cut from the Reserve Bank of Australia as soon as next week. Headline inflation inched lower by 0.2% for the quarter amid falling petrol costs, leaving the annual increase at just 1.3%. Dragging inflation lower in the quarter was a 10% plunge in petrol and an 11% decline in fruit prices, while the cost of international holiday travel and accommodation also declined. Annual underlying inflation, which excludes volatile price movements, was the weakest since records began in 1983, increasing just 1.55%. CPI data was well below expectations, and the Australian Dollar lost more than 1%, to around 76.60 US cents. Lower inflation will give more scope for the RBA to cut without risking more inflation in return if it decides the Australian economy needs more stimulus. Last week, when the central bank released its monthly cash rate statement, Governor Glenn Stevens said that persistently low inflation would provide scope for easier policy, should that be appropriate to underpin demand. Stevens added that inflation in Australia is likely to remain low over the next year or two, due to low domestic labour costs and the level of inflation elsewhere in the world.

German companies remain upbeat about the economy, but fears about weakening exports due to a slowdown in the US and China are dampening the mood among German executives. Ifo Business Climate unexpectedly deteriorated in April, with the gauge slipping to 106.6 compared with 106.7 in the preceding month. In contrast, economists had expected the index to rise to 107.1 level within the month period. The European Central Bank's decision announced in March to cut its deposit rate further into negative territory as well as increase the pace of monthly asset purchases to 80 billion euro did not manage to spur the growth of the index. Even though the data disappointed, it is still an improvement on low figures at the end of last year. The Ifo Current Assessment sub-index, measuring current conditions in the Euro bloc's powerhouse, declined to 113.2 points, below last month's 113.8. The Ifo Expectations Index, indicating firms' expectations for the next six months, increased to 100.4 points, beating the previous figure of 100, while analysts had projected a marginal improvement to 100.9. Meanwhile, an alternative ZEW economic index survey showed a slight improvement as it inched higher to 11.2 from 4.3, while expectations were at 8 points. However it is still extremely low, as too many investors are still pessimistic about the next six months.

Watch More: Dukascopy TV

Upcoming fundamentals: Fed Decision Day



Although we have got some important hard data released over Wednesday's trading session in Europe and US, analysts agree that the focus is going to be predominantly on the Federal Reserve today. This is especially important for traders of the EUR/USD currency pair and other Dollar-linked crosses. The US central bank is expected to raise interest rates today with literally zero probability, according to the federal funds futures market prices. Absence of Janet Yellen's post-factum press conference will not push attention away from this event, because everyone is eyeing the statement that is published along with the rate decision. Investors are speculating, whether the Fed has discussed the next meeting (June) and possibility of a rate hike that month. Some precise sentences from the Fed statement may considerably move the markets today at 18:00 GMT.


EUR/USD closes below 1.13 after bullish rally

The Euro was up over the trading session on Tuesday, with rallies underpinned by weaker than expected US statistics and upcoming rate statement of the Fed. Yesterday the cap was offered by the weekly R1 at 1.1341, which successfully turned EUR/USD back and forced it to close below the 1.13 mark. Nonetheless, the spot keeps hovering above the weekly pivot and 20-day SMA, providing hopes that the rebound will resume in the short-term. Bearish Fed would give a good ground for tackling the yesterday high, but otherwise a sell-off down to the 1.12 support cluster is not off the table.

Daily chart
© Dukascopy Bank SA

In the one-hour chart the pair fell slightly short of touching the March 17 peak at 1.1343, but it will have a chance to do that on Wednesday. We are going to observe, whether the 200-hour SMA will be powerful enough in order to act as a reliable demand for the Euro. Daily technical indicators turned neutral again, meaning there still is some degree of uncertainty for the time being.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment on EUR is 57% short

Additional value gains on the side of the single European currency have not had any influence on the current negative gap between long and short positions opened in the SWFX market. 43% of all market participants keep maintaining the bullish stance on the matter, no change over the past 24 hours. However, pending orders soared decisively to the levels above 50% for the longs' side. 55% of all commands are set to buy the Euro in a 50-pip range from the spot, as do 52% of the 100-pip orders.

The share of bearish positions is higher than 59% with OANDA, while SAXO Bank clients suspect the Euro will slump against the Greenback in almost 70% of all cases.













Spreads (avg,pip) / Trading volume / Volatility




Dukascopy Community members are short on EUR in almost 73% of all cases this week

© Dukascopy Bank SA

More than seven out of ten traders of Dukascopy expect the common currency of the Euro zone to drop against the Dollar, namely 72.7% of them. Among traders' opinions, Daytrader 21 suggests that "the ECB commitment to its aggressive easing stance couple with a resumption in the US Dollar bullish trend should keep EUR/USD under pressure in coming week. I am looking for a retest of the 1.1080 support level."


In the meantime, Trademaster preserves another view on the issue, by saying that "EUR/USD will be slightly bullish this week despite a dovish tone from ECB. Moreover, Euro is expected to appreciate after Fed meeting."

Average forecast says EUR/USD will trade at 1.12 by July

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between March 27 and April 27 expect, on average, to see the currency pair around 1.12 by the end of July. Though 57% of participants believe the exchange rate will be generally below this level in ninety days, with 41% alone seeing it below 1.08. Alongside, 23% of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on July 31.

© Dukascopy Bank SA

Actual Topics

Subscribe to "Fundamental Analysis" feed

Subscribe
To learn more about Dukascopy Bank CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
For further information regarding potential cooperation,
please call us or make callback request.
To learn more about Dukascopy Bank Binary Options / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Dukascopy Bank CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Crypto Trading / CFD / Forex trading platform, SWFX and other trading related information,
please call us or make callback request.
To learn more about Business Introducer and other trading related information,
please call us or make callback request.
For further information regarding potential cooperation,
please call us or make callback request.