EUR/USD at weekly highs, nearing 1.14

Source: Dukascopy Bank SA
  • 60% of all SWFX market positions are short
  • 55% of 100-pip pending orders remain long, while 50-pip commands are neutral
  • Testing of 1.14 is highly likely on Friday, given recent gaining streak of the pair
  • Daily technical indicators indicate the pair is at risk of becoming overbought
  • Economic events to watch over the next 24 hours: German Retail Sales (Mar); French CPI (Apr) and GDP (Q1); Spanish (GDP); Swiss KOF Leading Indicator (Apr); SNB Chairman Jordan Speaks; Euro zone GDP (Q1), CPI Estimate (Apr) and Unemployment Rate (Mar); US Personal Income and Personal Spending (Mar), Chicago PMI (Apr) and Final University of Michigan Consumer Confidence Index (Apr); FOMC Member Kaplan Speaks

© Dukascopy Bank SA
The Japanese Yen posted a colossal 2.77% spike in value against the Euro on Thursday after the Bank of Japan decided to stay on hold and keep interest rates unchanged. Along with that, the QE programme's volume remained stable at 80 trillion yen per year. More than 50% of analysts surveyed by Bloomberg had expected further monetary policy measures in the wake of recent appreciation of the Yen, which became turbulent after BOJ introduced a negative key interest rate. Moreover, there were rumours this central bank was ready to offer bank loans with negative interest rates, but Governor Haruhiko Kuroda said during his press conference that this scenario is not on the table for the moment. EUR/NZD cross was the second-biggest loser of the day. By retreating 1.49%, the Kiwi showed that it managed to recover from Wednesday's losses amid central bank events. Even though the RBNZ left door open for future policy easing, the US Federal Reserve has not trailed its New Zealand colleagues by sending mixed signals about the next policy meeting in June. US economic growth has additionally weakened the Buck, as the world's economic powerhouse added only 0.5% in Q1 2016.

The number of unemployed people in Germany continued to decline in April reaching a historic 25 years low despite the refugee crisis. The number of unemployed people in Germany dropped from March to April by 101,000 to 2.7 million, marking a 25 years' low. The unemployment rate remained at the record-low level of 6.2%. Meanwhile, a separate report showed price growth in Germany decelerated more than expected in April. Inflation in the Euro zone's powerhouse climbed 0.1% year-on-year in April, down from the 0.3% growth seen in March, according to the Federal Statistics Office. On a monthly basis, the measure trashed 0.2% in the reported month, down from the 0.8% rise recorded previously. The Harmonized Index of Consumer Prices showed inflation dropping 0.1% year-on-year, compared with March's 0.1% rise. Separately, the Euro zone's business climate improved less than expected in April. The European Commission's Business Climate Index climbed to 0.13 in the reported month, compared with an upwardly revised 0.12 in March. At the same time, the economic sentiment in the Euro bloc increased to 103.9 in April, up from 103.0 registered in March.

New Zealand firms were more upbeat about the economic outlook this month as a sturdy construction sector remains central to the country's growth in the coming year, while retail, construction, and service firms felt the biggest boost in confidence. The ANZ Business Outlook survey showed that a net 6.2% of New Zealand companies were optimistic about general business conditions and the economy in April, up from 3.2% in March. Some 32% predict their own activity to increase, compared with 29% a month earlier. Construction is still the most optimistic sector in terms of the wider economy and its own activity, and residential investment intentions were unchanged at 36%, while commercial construction intentions slipped to 24% from 30%. ANZ report showed the agriculture sector was the most pessimistic with a net 27% anticipating the economy will deteriorate over the coming year, and just 6% expect their own activity to improve. A separate report showed new residential building approvals fell steeply in March after climbing at the fastest rate in seven months in February. New Zealand building consents dropped a seasonally-adjusted 9.8% month-on-month in March, according to Statistics New Zealand, after surging a revised 10.3% in February.

Watch More: Dukascopy TV

Upcoming fundamentals: Busy EU session with GDP and CPI due



For the first time ever the Euro zone's inflation and economic growth data will be released simultaneously at 9:00 GMT, also joined by unemployment figures. The preliminary CPI estimate for April is expected to reveal a second month of -0.1% annual inflation rate. The GDP report is likely to show the common currency area's economic expansion of 0.4% in the first three months of 2016, compared to the last three months of the previous year. In the meantime, March jobless rate is forecasted to remain flat at 10.3%. Prior to all of them, separate European countries are going to release their inflation and growth data, with French numbers due at 6:45 GMT and Spanish GDP up at 7:00 GMT.


EUR/USD at weekly highs, nearing 1.14

Five days of gains for the Euro, including Friday, is a direct result of US Dollar's inability to consolidate momentum, while weak fundamentals are only fuelling the rally. Yesterday EUR/USD breached the weekly R1 at 1.1341, meaning at the moment the pair is a position to advance up to the last week's peak at 1.1398. The most substantial resistance, however, is placed higher at 1.1490 where the bulls are going to encounter the February-April uptrend line and the October 2015 high. In the meantime, bullish outlook is boosted by the fact that the 100-day SMA has just crossed the less-volatile 200-day SMA to the upside.

Daily chart
© Dukascopy Bank SA

EUR/USD is quickly approaching the April 21 high at 1.1398 and the winning streak of the currency pair sees no end today. The base case scenario would allow for extension of an increase up to the September 2015 high and April 12 high at 1.1461/65. Despite that, we continue assuming the medium-term movement will continue to be largely range bound; therefore, a spike somewhat above 1.15 is not on the table.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment is 60% short

Further gains on the side of the single European currency continue having no major influence on the current negative gap between long and short positions opened in the SWFX market. Only four out of ten market participants keep maintaining the bullish stance on the matter, down from 42% yesterday. Pending orders placed within 50 pips from the current market price are completely equally distributed between the bulls and bears this morning, while broader-range 100-pip commands are 55% bullish today.

About 65.35% of all OANDA traders are now betting the Euro is going to depreciate against its US peer, while yesterday and on April 27 only 62.5% and 59% of them, respectively, had maintained the same view. Alongside, 70.2% 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

© 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 29 and April 29 expect, on average, to see the currency pair around 1.12 by the end of July. Though 55% of participants believe the exchange rate will be generally below this level in ninety days, with 42% (+1%) alone seeing it below 1.08. Alongside, 22% 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.