- SWFX market sentiment is neutral for the first time in 2.5 months
- Pending commands are mostly placed to sell the Euro
- If the pair consolidates below 100-day SMA on Wednesday, the next support to watch is 200-day SMA at 1.11
- Daily technical signals are bearish on EUR/USD
- Economic events to watch over the next 24 hours: German IFO Business Climate (May); FOMC Members Harker, Kashkari and Kaplan Speak; US International Trade Balance in Goods (Apr) and Crude Oil Inventories (May 20)
German investor confidence declined for the first time in three months in a sign that the Euro zone's number one economy is set to slow after growing at its strongest pace in two years. The ZEW Center for European Economic Research said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, plunged to 6.4 from 11.2 in April, reflecting concerns over a Britain's exit from the European Union. The current situation sub-indicator came in at 53.1 in the reported month, climbing from April's 47.7 and compared with analysts' forecast of 49.0 points. Additionally, data from the Federal Statistics Office confirmed Europe's largest economy expanded 0.7% in the first quarter on the back of an investment surge, compared with the final quarter of 2015, when the German economy added just 0.3%. In the January-March period, German growth was supported by a 2.3% advance in construction that pushed up capital investment by 1.8%. Private consumption climbed 0.4%. Investment contributed 0.4 percentage point to growth in the reported period, with consumer spending adding 0.2 point and government consumption 0.1 point. In contrast, net trade subtracted 0.1 percentage points from GDP expansion as imports outpaced exports.
New Zealand posted a bigger-than-expected trade surplus in April as increased volumes of gold kiwifruit and apples boosted shipments of fruit, the country's fourth-biggest export product. The trade data showed a surplus of $292 million in April versus $189 million in the previous month. Goods exports advanced 4.0% in April, up $166 million to $4.3 billion, Statistics New Zealand reported. Sales of fruit surged 16% to $418 million in April from the same month a year earlier, pushed up by a 53% advance in sales of gold kiwifruit as volumes climbed 29%, while apple exports soared 29% in value terms and 13% in volume. Annual fruit exports skyrocketed 33% to $2.42 billion, the fastest pace among the country's 12 export commodities that achieve sales of at least $1 billion. The total value of imported goods in April 2016 was $4.0 billion, up $58 million.The data also showed that the annual trade deficit widened to a new seven-year low in April, as falling values of primary exports continued to weaken the country's balance of trade. New Zealand's annual trade deficit was $3.66 billion, less than the $3.94 billion expected by economists, but a bigger shortfall than the $2.66 billion deficit in the same period a year earlier. Exports, which accounts for 30% of New Zealand's gross domestic product, rose $166 million or 1.5% to $4.3 billion in April. Meanwhile, imports increased $58 million or 1.5% to $4 billion.
Upcoming fundamentals: German business climate likely to stay flat in May
The Euro zone's economic calendar will kick off with some German business confidence data. The IFO Institute's figures are due at 8:00 GMT and economists are looking for a reading of 106.8 points this month, up slightly from 106.6 in April. The net indicator of above 100 points means improving conditions among companies in Germany, while historical evidence shows that growing IFO often results in soaring industrial production in the country. As for the US, three Fed presidents are set to talk later in the day.
EUR/USD plummets to two-month low
Daily chart: By losing 80 pips or about 0.7%, the EUR/USD currency pair dropped the most in four days on Tuesday and closed the session below the 100-day SMA and weekly S1 at 1.1140. While the upward correction is likely today, we are still closely monitoring the ability of the bears to fix a consolidation below the aforementioned support area. By doing that, they will start aiming at the 200-day SMA, currently near 1.11, with the intermediate demand being the monthly S2 at 1.1126. Moreover, daily technical indicators are broadly backing this scenario at the moment.Daily chart
Hourly chart: As soon as EUR/USD neared the channel down pattern's upper boundary it 1.1230, it commenced a major setback and started moving in the direction of the lower edge. It has already flirted with the March low at 1.1143, but this marker remains unconfirmed for the time being. The mid-term focus is on the area below 1.11 and potentially the March 16 low at 1.1057.
Hourly chart
Sentiment turns neutral as Euro slides down
However, sentiments of both OANDA and SAXO Bank marketplaces are still bearish towards the researched currency pair. OANDA clients are 51.68% negative today, as are about 59% of SAXO Bank market participants.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members are bearish on this week's perspectives of EUR/USD
60% 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 27 stands at the level of 1.124. Among traders, megajorko suggests that "EUR/USD has broken a lot of support lines recently but the main still stays - 1.116-1.118. This was the start of the rise when Janet Yellen announced no rate hike and now the new information about the hawkish fed turns the pair more bearish. Without any bullish momentum, I think, my target from the year start of 1.1111 will be end of weekly/monthly target".
At the same time, trader Pisakjanos expects "stagnation in the vicinity of the support, with large oscillations."