- 63% of all SWFX market positions are short, the highest number in three months
- 52% of 100-pip pending orders are short, while 50-pip commands are similarly long
- Pair to encounter its closest Tuesday resistance at 1.1538 (monthly and weekly R1s)
- Daily MACD, Stochastic and CCI indicators are offering "sell" signals for EUR/USD
- Economic events to watch over the next 24 hours: FOMC Members Mester and Lockhart speak
ECB President Mario Draghi responded to critics from German Finance Minister Wolfgang Schauble that negative interest rates hurt savers and weighing on the banking sector. Draghi said that low interest rates are not harmless but they are only the symptom, not the cause of an underlying problem, adding that there was no alternative for now. Meanwhile, the Euro zone's manufacturing sector expanded in April, recording a marginal improvement from the March reading. The manufacturing PMI in the Euro bloc ticked up to 51.7 points in the reported month, up from 51.6 points and compared with the preliminary reading of 51.5, according to Markit. Factory activity in the Euro area's powerhouse, Germany, revealed a fresh upside trend in April. Germany's final manufacturing PMI increased to 51.8 points during April, advancing from the previous final March reading of 50.7. Last week's GDP data showed 0.6% growth of the Euro zone's economy in the first quarter of 2016, compared with last quarter's 0.3%. On an annual basis the economy expanded 1.6%, in line with the previous number and beating the 1.4% estimate. Despite positive GDP numbers, Euro zone policy makers should be alert, as the CPI estimates showed the single currency area sliding further into deflation territory, as the estimated CPI dropped from -0.1% to -0.2% on an annual basis.
The Reserve Bank of Australia surprised economists by slashing interest rates to a new historic low in a bid to reignite inflationary pressures. The central bank cut the official cash rate by 25 basis points to 1.75%, after keeping rates on hold for a year. The decision came after the Australian Bureau of Statistics released quarterly CPI data, showing headline inflation plunged from 1.7% in the final quarter of 2015 to 1.3% last quarter. Worrisome though, was that all three gauges of underlying inflation came in below the RBA's 2-3% target range in the reported period, with two of the three core measures hitting their record low. RBA Governor Glenn Stevens also added that softening conditions in what was an overheated housing market allowed the central bank to cut without fear of fuelling unsustainable price growth. While Australia's inflation outlook appears to be darkening, the country's broader economic health has been steadily improving for some time. The economy is continuing to rebalance following the mining investment boom, according to the RBA's cash rate statement. Low interest rates have been supporting demand and the lower exchange rate overall has helped the traded sector. Yet, Stevens reiterated the Australian Dollar's strength "could complicate" the necessary adjustment in the economy. The Aussie has gained around 12% against the US Dollar since mid-January, further dampening the inflation outlook and hurting exporters.
Upcoming fundamentals: Fed's Mester and Lockhart to speak Tuesday
Cleveland Fed President Loretta Mester is going to participate in a panel discussion about monetary policy's influence on market volatility at 14:30 GMT. With current policy comments possible, it will be closely watched by the markets because of Mester's voting status on the FOMC committee this year. In the meantime, another Fed policymaker, Atlanta Fed President Dennis Lockhart is going to talk about monetary policy and economic outlook at 23:00 GMT. Lockhart is not voting for policy decisions in 2016. As for Tuesday's European session, it is expected to be largely quiet this time.
EUR/USD surges past 1.15, stopped by W/M R1
Weakness of the Dollar transferred to the new working week, as another piece of soft North American data pushed EUR/USD beyond 1.15. By violating multi-month resistances, including the October 2015 high, the pair was only capped by the weekly and monthly R1s placed around 1.1538. This is the initial supply for Tuesday, but the rally until the second bunch of resistances (weekly/monthly R2) at 1.1619/26 is not off the table. Now the cross is trading at its peak levels since August of the last year and weekly technical indicators suggest the uptrend is ready to continue.Daily chart
Not only EUR/USD pair is trading in a distinct upward trend for multiple days in a row, this FX cross is managing to violate upper boundaries of bullish channels. With the October 2015 high (1.1495) being left behind, now the focus is on the previous year's August 26 high at 1.1560. By tackling this resistance, the next historical maximum in line is expected to be the 1.1714 level (August 2015 high).
Hourly chart
SWFX sentiment most bearish in 3 months
It required only one working day to return the SAXO Bank's bearish market share above the OANDA's one. With the latter, the bulls' condition has become somewhat less disappointing as they are up to 35.2% today from 32% yesterday. SAXO Bank clients are more than 72% Euro-short today.