- 60% of all SWFX market positions are short
- 55% of 100-pip pending orders remain long, while 50-pip commands are neutral
- Pair is facing important horizontal resistance at 1.1468, backed by April high three pips lower
- Daily MACD, Stochastic and CCI indicators are offering "sell" signals for EUR/USD
- Economic events to watch over the next 24 hours: Euro zone Final Manufacturing PMI (Apr); Bundesbank President Weidmann Speaks; US ISM Manufacturing PMI (Apr); ECB President Draghi Speaks; FOMC Members Lockhart and Williams Speak; SNB Chairman Jordan Speaks
The Euro zone posted mixed fundamentals with the economy growing strongly and unemployment falling slightly while consumer prices dropped yet again into deflation territory. The flash estimate for Euro zone gross domestic product rose 0.6% in the first quarter from the previous quarter, compared with expectations for growth of 0.4%, according to Eurostat. On an annual basis, Euro zone's economic activity expanded 1.6% in the first quarter, the same as in the quarter to December, while analysts had forecast a rise of 1.4%. Meanwhile, unemployment in the Euro zone for March declined slightly to 10.2%, the lowest rate recorded in the region since August 2011, from 10.4% in the previous month. However, annual inflation rate in the euro area remained in negative territory for the third consecutive month in April. The latest flash estimate showing that consumer prices declined 0.2% in April, from a flat reading of 0.0% in March. On an annual basis, core inflation, which strips out volatile prices such as those for oil and food, climbed 0.8% in April, down from the 1.0% build seen in March. The data came after the European Central Bank deployed further stimulus measures in March in an attempt to underpin growth and inflation, which is currently a way off from the bank's target of below, but close to, 2%.
The Fed's favourite inflation barometer slowed in March, falling from one-and-a-half-year highs, while consumer spending ebbed. The price index for personal consumption expenditures excluding food and energy ticked up 0.1% in March, following a revised 0.2% gain. The rate of inflation over the past 12 months slid to 1.6%. In the previous two months, the core deflator was growing 1.7% year-on-year, the quickest pace since mid-2014. Inflation is being restrained by a strong Dollar and cheaper energy. A tightening labour market also failed to generate strong wage gains, contributing to moderate consumption growth. In March, consumer spending, which accounts for more than two-thirds of U.S. economic activity, ticked up 0.1% after an upwardly revised 0.2% gain in February. Consumer spending is expected to pick up momentum as wages steadily rise. Personal income climbed 0.4% in March after nudging up 0.1% in February. Meanwhile, confidence among America's shoppers worsened for the fourth straight month in April. The Thomson Reuters/University of Michigan preliminary consumer confidence index declined to 89.0 points in April, down from the final 91.0 reported in March, when it had dropped to a fresh five-month low. The current economic conditions sub-index improved to 106.7, while the indicator tracking future expectations declined 4.8 points to 77.6 during the reported month.
Upcoming fundamentals: EU PMIs, while Draghi and Jordan speak
Monday will kick-off with final manufacturing activity data for the Euro zone at 8:00 GMT. It will be preceded by similar data for various countries including Spain at 7:15 GMT, Italy at 7:45 GMT, France at 7:50 GMT and Germany at 7:55 GMT. At 9:30 GMT the President of Deutsche Bundesbank Jens Weidmann is going to speak in Leipzig, Germany, while at 14:00 GMT the ECB President Mario Draghi will talk at an Asian Development Bank's annual meeting in Frankfurt, Germany. Meanwhile, 14:00 GMT is also the time for an ISM Manufacturing PMI data release in the US. April data is expected to show another slowdown in this activity indicator to 51.4 points from 51.8 indicated by the previous report.
EUR/USD to tackle April high amid rally
Advance of the Euro against the Greenback was stretched over the American session on Friday, as the market allowed for a spike up until the 1.1450 mark. Although the pair fell short of reaching the April high at 1.1465, we foresee such a scenario later in the new week. However, at 1.1468 the bulls will face another resistance represented by various 2015-2016 peaks in this area. The second supply for this week is placed at 1.1538 (weekly and monthly R1). In the meantime, dips lower are still expected to be shallow and the weekly/monthly pivot points are expected to act decisively at 1.1376.Daily chart
Currently the EUR/USD is hovering around its highest levels since October of the previous year. There is a narrow 30-pip spread between the spot and the actual October 2015 high. While underpinned by the 200-hour SMA, currently as low as 1.1318, and the bullish channel's trend-line, the cross gives no signs of weakening over the next 24 hours. The outlook will deteriorate, only if EUR/USD loses ground under the 1.14 mark.
Hourly chart
SWFX sentiment is 60% short
About 68.35% of all OANDA traders are now betting the Euro is going to depreciate against its US peer, while on Friday, Thursday and Wednesday only 65.35%, 62.5% and 59% of them, respectively, had maintained the same view. However, for the first time over a considerably long period the bearishness of the SAXO Bank market (62.45%) is less pronounced than OANDA's one.