- 54% of all SWFX market positions are short
- Pending orders are broadly mixed on EUR/USD
- Closest resistance lies at 1.1468/75, while short-term support is offered by 1.1346/20 area
- Both daily and weekly technical indicators are giving signals to buy EUR
- Economic events to watch over the next 24 hours: German Factory Orders (Mar); Swiss CPI (Apr); FOMC Members Evans and Kashkari Speak; US Labour Market Conditions Index (Apr)
The number of Americans applying for unemployment benefits increased more than expected last week, recording the biggest gain in more than a year, but the underlying trend still continued to indicate a strengthening labour market. Initial claims for jobless benefits rose by 17,000 to a seasonally adjusted 274,000 in the week ended April 30, according to the Labor Department. Despite the higher-than-expected rise, claims are still near historically low levels. Claims hit a four-decade low of 248,000 in the week ended April 16 week, the lowest level since 1973. Last week was also the 61st straight week that initial claims were below 300,000, extending the longest streak since 1973 amid steady job growth. The four-week moving average of claims, considered a better gauge of labour market trends as it smoothes out week-to-week volatility, increased 2,000 to 258,000 last week. The Labor Department is expected to report later in the day that nonfarm payrolls advanced by 202,000 jobs in April following a gain of 215,000 in March. The unemployment rate is seen to remain unchanged at 5.0% and average hourly earnings are predicted climbing 0.3% for a second consecutive month. The job market has continued to improve this year, averaging monthly nonfarm payroll gains of 209,000 despite weak first-quarter growth of just 0.5%. Workforce participation is on the rise and the unemployment rate in March was 5%.
Britain's services sector faced its worst month of growth in more than three years in April, indicating a further slowdown in total GDP growth in the short term ahead of the EU referendum. The Markit/CIPS PMI measure of business activity in Britain's services sector, which accounts for 79% of the UK's GDP, dropped further to 52.3 last month, reaching the lowest level since February 2013, down from 53.7 recorded in March, and below the estimate of 53.5. The UK economy expanded by 0.4% in the first three months of the year, compared with 0.6% growth in the final quarter of 2015. Recent surveys for the manufacturing and construction sectors for April suggested growth has since continued to slow, as businesses and consumers hold back amid concerns over the outcome of the referendum on June 23. The UK manufacturing sector encountered a surprise contraction in April that reflected in the PMI, as it entered negative territory for the first time in 4 years, plummeting under the 50 point mark to show 49.2 points. At the same time the UK's construction output rose at the slowest pace in nearly three years in April, with the PMI gauge of business activity within Britain's construction sector falling to 52 last month from 54.2 in March.
Upcoming fundamentals: FOMC's Evans and Kashkari to speak about policy issues
European session will be marked only by Germany's factory orders data for March, which is going to be published by the time this report is released. In the meantime, two Federal Reserve banks' presidents are going to talk during Monday. Firstly, Chicago Fed President Charles Evans will participate in a panel discussion in London at 9:10 GMT and will speak about economy and monetary policy. Evans is a non-voting member of the FOMC committee in 2016. Meanwhile, head of the Minneapolis Fed Neel Kashkari will talk to the Economic Club of Minnesota at 17:00 GMT. He is another non-voting FOMC member this year.
EUR/USD in limbo between 1.1470 and 1.1345
EUR/USD was literally unchanged on May 6, after the monthly R1 turned to be a tough resistance that was able to limit the rally near 1.1475. This level is reinforced by the weekly pivot point throughout the new five-day period, thereby creating the first major supply for the pair. On the other hand, the bears are monitoring the area around 1.1330, with the monthly pivot being placed at 1.1346 and weekly S1 resting near 1.1320. Without strong fundamental drivers, EUR/USD is likely to keep fluctuating in this range over the next 24 hours. Alongside, the daily technical signals are slightly tilted to the north.Daily chart
Overall situation also remains unclear in the 1H chart, where the spot of the pair is trying to cope with the 200-hour SMA, currently at 1.1427. However, if EUR/USD consolidates under the simple moving average on Monday, then the outlook is going to diminish considerably. The closest historical low is the April minimum at 1.1215, almost 200 pips below the current exchange rate.
Hourly chart
Pending orders improve above 50% as sentiment remains short
61.5% (64% on Friday) of OANDA clients are betting the EUR/USD currency pair will slump in value, while SAXO Bank traders are maintaining the same view on the matter in 66.18% (65.18% before the weekend) of all cases.