- SWFX market sentiment is completely neutral
- Pending commands are mostly placed to sell the Euro
- 100-day SMA at 1.1167 represents the closest resistance for EUR/USD on Thursday
- None of daily technical indicators are pointing to the upside today; aggregate signal is strongly negative
- Economic events to watch over the next 24 hours: Spanish GDP (Q1); Italian Retail Sales (Mar); FOMC Members Bullard and Powell Speak; US Durable Goods Orders (Apr) and Pending Home Sales (Apr)
German business confidence improved more than expected in May, hitting its highest level in five months, and supporting optimism that Euro zone's biggest economy will extend its surprisingly strong start to the year into the second quarter. The German research institute report showed that Business Climate Index picked up to a seasonally adjusted 107.7 this month from a revised 106.6 in April, exceeding forecasts for 106.8. Thus, combined with the stronger PMI numbers, the Ifo provides an upbeat picture of the economic development of Germany. Meanwhile, a separate report showed that the Current Assessment Index rose to 114.2 in May from 113.2 in previous month, beating expectations for 113.2. In addition, the Business Expectations Index that measures attitudes toward business prospects over the next six months, increased to 106.6 this month from 100.4 a month earlier, surpassing expectations for 100.8. The German economy expanded by 0.7% in the first three months of 2016, indicating its strongest quarterly growth rate in two years, driven mainly by soaring private consumption and higher construction investment. Though, analysts expected the economy to lose steam over the summer months, the Ifo index for May suggested that any slowdown could be very limited.
Private capital expenditure in Australia dropped more than expected in the first quarter, a further sign the risks for Australia's March quarter GDP data appear to be building to the downside. According to the Australian Bureau of Statistics, business investment plunged 5.5% to $30.613 billion in the three months through March, as non-mining expenditure again failed to pick up the slack in Australia's resources slowdown. Economists, however, had expected a smaller decrease of 3.5%. Spending on equipment, plant and machinery, a direct contributor to GDP, declined 0.5% to $11.753 billion, beating expectations for a fall of 2%. Elsewhere expenditure on building and structures slumped 7.9% to $18.86 billion, well below forecasts for a decrease of 3.0%. The March numbers also showed a persistent downbeat outlook, although projections are not as depressed as they were at the end of the final quarter of 2015. The second estimate for 2016-17 capital investment came in at $89.2 billion, compared with $82.6 billion in the first estimate at the end of the December quarter. The second estimate is 14.6% below the same reading last year, but the gap shrank as estimate one showed a 19.5% difference to the prior year.
Upcoming fundamentals: Spanish economic growth to be confirmed at 0.8% in Q1
At 7:00 GMT the Spanish first-quarter economic growth data will kick-off the European fundamental calendar on Thursday. This data is going to be a confirmation of earlier estimates; therefore, an unchanged 0.8% quarterly expansion is on the table. On an annual basis the Euro zone's fourth largest economy is forecasted to add 3.4%, one of the strongest performances in the whole currency bloc. Meanwhile, Italian retail sales for March are up at 8:00 GMT. Thursday is an important day for US fundamentals. Durable goods orders are due at 12:30 GMT, with pending home sales coming out later at 14:00 GMT. Alongside, two speakers from FOMC will take the stage throughout both European and US sessions.
EUR/USD attempts to erase earlier losses
Daily chart: EUR/USD consolidated under the 100-day SMA on Wednesday, thereby pushing our short-term outlook further downwards. However, on early Thursday morning the pair is trying to reclaim the moving average and eliminate a heavy decline that had been registered on Tuesday. If successful, the bulls will neutralize the forecast to start focusing on the weekly pivot at 1.1250. Most likely, the upward risk is created by a dense cluster of supports starting from 1.1126 (monthly S2) and below, including the 200-day SMA at 1.11. In the meantime, daily technical studies are strongly negative on the Euro today.Daily chart
Hourly chart: The cross returned to the channel down's upper boundary at 1.1180 and is expected to kick off a testing of this line on May 26. On the other hand, the April low at 1.1215 together with the 200-hour SMA at 1.1233 will attempt to calm the bulls down. In case the rally continues, initial attention should be paid to the May 17 peak at 1.1349.
Hourly chart
Sentiment remains neutral, orders rebound gradually
However, sentiment of both OANDA and SAXO Bank marketplaces is still bearish towards the researched currency pair. OANDA clients are 50.72% negative today, as are about 60% 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."