- 58% of all SWFX market positions are short
- 52% of 100-pip pending orders remain long, as 50-pip commands are 53% short
- Third failing attempt to attack the weekly R1 at 1.1341 may signal bullish impetus is not strong enough
- Daily technical indicators are moderately positive
- Economic events to watch over the next 24 hours: Spanish Unemployment Rate (Q1); Swedish Retail Sales (Mar); German Unemployment Change (Apr), Unemployment Rate (Apr) and CPI (Apr); US Advance GDP (Q1), PCE Price Index (Q1) and Unemployment Claims (Apr 23)
The British economy slowed in the first quarter, hit by an ongoing decline in the industrial sector and concerns that a looming vote on the country's membership of the EU will hurt the economy further. According to the Office for National Statistics, the UK economy expanded 0.4% in the three months through March, following a 0.6% growth in the final quarter of 2015. Measured on an annual basis, Britain's economic output increased 1.6%, down from 2.4%. The slowdown was led by a slump in manufacturing and construction, which offset strong growth in the UK's dominant services sector. Output increased in the services sector by 0.6% in the first quarter, but production dropped by 0.4%, construction output fell 0.9% and agriculture slid 0.1%. Bank of England officials said that they expect the economy to expand more slowly in the first half of the year than it did in late 2015 as uncertainty over the referendum outcome forces companies to delay hiring and investment. The OECD said that the British economy could be as much as 3% smaller by 2020 if it leaves the EU than if it stayed in. BoE Governor Mark Carney, meanwhile, highlighted a sharp depreciation in Pound's exchange rate versus other currencies should Briton's vote to leave the EU could boost the annual rate of inflation.
The Reserve Bank of New Zealand kept interest rates on hold, but said it may need to cut rates further as slowing global economic growth and a strong New Zealand Dollar prolong a period of tepid inflation. All bets are now on the RBNZ cutting the OCR to 2.0% in June. The RBNZ has already slashed the official cash rate five times in less than a year. The central bank is also concerned about the relative strength of the local currency, which is making exporters and import-exposed industries less competitive. The New Zealand Dollar advanced more than 1% following the central bank's decision. In March, the RBNZ forecast inflation will return to 1% late this year, and reach the 2% target midpoint by early 2018. Consumer prices climbed just 0.4% in the year through March. Pressure in the housing market is one of the main threats to the domestic outlook, according to RBNZ Governor Graeme Wheeler. The central bank is monitoring the property market amid signs that prices in Auckland are rising again. Wheeler is conscious that lower borrowing costs could add fuel to housing demand and pose a risk to financial stability. On international perspective, flagging growth in China was being closely watched and the RBNZ was alert to weakness in other key economies.
Upcoming fundamentals: German labour market and inflation data
Economic calendar is busy from both sides of the Atlantic on Thursday. At 7:55 GMT the fresh labour market data for Germany is due, with analysts forecasting no change to the number of people unemployed and a 6.2% rate of unemployment in April. At 12:00 GMT inflation statistics will shed some first light on price developments in the Euro area this month. Germany's CPI is estimated at -0.1% on a monthly basis and investors see a slowdown to 0.2% on a yearly time frame. On top of that, Spanish unemployment data is due at 7:00 GMT and investors suggest the jobless rate will stay on hold at 20.9% in the first quarter. Importance of American session is reflected in the upcoming first-quarter GDP figures, which will likely show the world's biggest economy rose at its slowest pace in a year.
EUR/USD ready to tackle weekly R1 at 1.1341
Third consecutive session was finished with gains for the Euro, but somewhat hawkish Federal Reserve prevented a spike above the weekly R1 at 1.1341. Likelihood of another testing of this resistance is high, given that from below the EUR/USD pair is backed by the weekly pivot point and 20-day SMA. The rally should ultimately pave the way for additional purchases, as the cross will be bid until 1.14 (April 21 high) where it is going to face a stronger downside pressure. Meanwhile, indicators on a daily time frame are mixed today.Daily chart
With the March 17 peak violated, the currency pair is expected to move in the direction of the next local resistance level, namely the April 21 peak at 1.1398. EUR/USD consolidated beyond the 200-hour SMA, currently at 1.13, and this fact raises the probability of a rally from the point of view of the 1H chart's developments.
Hourly chart
SWFX sentiment is 58% short
About 62.6% of all OANDA traders are now betting the Euro is going to depreciate against the US peer, while yesterday morning only 59% of them had maintained the same view. Alongside, 68.8% of SAXO Bank clients are now holding short EUR/USD positions.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members are short on EUR in almost 73% of all cases this week
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."