- 54% of all SWFX market positions are short
- Pending commands bet that EUR/USD will decline in the future
- Risks are skewed to the downside, as the pair closed below 55-day SMA
- Daily technical indicators changed from bullish to neutral today
- Economic events to watch over the next 24 hours: Euro zone (Mar); US Unemployment Claims (May 14) and Philadelphia Fed Manufacturing Index (May); FOMC Members Fischer and Dudley Speak
Data on inflation from Eurostat added to the worries of the European Central Bank as the Euro area returned to deflationary territory. Consumer prices fell by 0.2% on an annual basis in April, showing a negative trend from March, when the gauge displayed no change. On a month-to-month basis the gauge grew 0%, down from last month's 1.2% growth and in line with estimates. The development is certainly bad news for the ECB, which has pursued strong monetary stimulus and quantitative easing measures, targeting the low inflation levels. The QE programme was expanded to 80 billion dollars per month in March, while interest rates were pushed further into the ground to -0.4%. However, regardless the present gloomy inflationary scene, ECB's struggles to curb the deflationary pressures cannot be yet discredited. Analysts believe that the central bank will stand pat for a while, but they bet that it will eventually have to do more. The 19-country block experienced deflation for the first time in 2014, following a consistent decline in the measure. The CPI has showed levels under the targeted 2% since March 2013 already, entering the "danger zone" with numbers under 1% in November the same year.
The minutes of the April Fed meeting, when the US central bank left interest rates on hold in line with economists' expectations, showed that officials believed the US economy could be ready for another interest rates hike in June. Most members of the policy-setting committee's said they looked forward to seeing signs that economic growth was gaining steam in the second quarter and that employment and inflation were firming, the minutes showed. Fed officials said recent economic data made them more confident inflation was climbing toward the 2% target and that they were less concerned about a global economic downturn. However, some policymakers were worried about a slowdown in US economic growth during the first quarter, when gross domestic product increase slowed to a two-year low of 0.5%. Yet others argued that ongoing strong job growth indicated the economy was still on track and the growth data could be flawed. Data since the end of April pointed to an increase in consumer spending and manufacturing output, supporting the view that economic growth was gaining momentum after stalling in the first quarter. Some policy makers said they were worried financial markets could be roiled by a possible UK exit from the European Union in a vote next month or by China's exchange rate policies.
Upcoming fundamentals: Euro zone current account to grow in March
At 8:00 GMT the Euro area's current account data is first up today. The surplus amounted to 19 billion euros in February and is set to advance to 19.6 billion euros in the following month. At 11:30 GMT the European Central Bank will publish the accounts of its latest meeting. A bulk of statistical data will be out in the US today, with weekly unemployment claims and the monthly Philadelphia Fed Manufacturing Index both up for revisions. Claims for jobless benefits surged two weeks before to the highest level since early July 2015 of 294,000. Analysts are forecasting a drop down to 275,000 for the week ended May 14 of this year. Alongside, the Philly Fed manufacturing activity index will likely come back above the zero mark in May, by reaching 3.0 points. This is going to be up from -1.6 points in April.
EUR/USD tests April low after hawkish Fed
The Federal Reserve's expectations on hike interest rates in June caused the Dollar's rally on Wednesday. The EUR/USD pair closed under the 55-day SMA, currently at 1.1289, and the sell-off found a cap at the April low (1.1214). This historical level is going to act as the most immediate short-term support on Thursday, but the risks are inevitably tilted to the downside. In the medium-term there is a possibility of a slide down to the 100-day SMA, which is supported by the lower Bollinger band at 1.1154/49. As for the technical studies, they are giving mixed signals on a daily basis.Daily chart
According to the short-term chart, the likelihood of more losses is quite high at the moment. The currency pair has not returned above the 200-hour SMA for almost two weeks and the bearish pressure continues to increase rapidly.
Hourly chart
More SWFX traders see EUR/USD regaining strength
Sentiments of both OANDA and SAXO Bank marketplaces are also bearish towards the researched currency pair. OANDA clients are 53.78% negative today, while about 60.63% of SAXO Bank positions are also maintaining the short future outlook.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members are bearish on this week's perspectives of EUR/USD
Three fourths of the Dukascopy Community members are expecting a decline in the value of the Euro against the Greenback by the end of this working week. The median estimate for May 20 stands at the level of 1.13. Among traders, megajorko suggests that the pair will indeed tumble over the next few days. He says that "I see a slightly bearish outlook and the only thing that could weigh is FOMC decision. We saw a better than expected retail sales number and this will give some boost to USD [...]."
On the other hand, trader Eco assumes that the incoming European fundamental statistics will be supportive for the European currency, not the US Dollar. He thinks that "This week will bring a lot of economic announcements that may support the Euro."