- SWFX market sentiment is 51% bearish
- Pending commands are mostly (56%) placed to sell the Euro
- A shallow rebound of EUR/USD is unlikely to continue, given a dense supply cluster at 1.1155/75
- Aggregate daily technical indicator bets EUR/USD is going to depreciate
- Economic events to watch over the next 24 hours: German Retail Sales (Apr) and Unemployment Change (May); French CPI (May); Danish GDP (Q1); Euro zone Flash CPI (May); Italian GDP (Q1) and Unemployment Rate (May); US PCE Index (Apr), Personal Income (Apr), Personal Spending (Apr), Chicago PMI (May) and Consumer Confidence (May); FOMC Member Bullard Speaks
German import prices fell at the fastest pace in more than six years in April on slipping energy prices. Import prices decreased 6.6% on year-on-year basis in April after falling 5.9% in March, while number of economists anticipated a 6.2% decline for April. The 6.6% year –on-year fall in April was the biggest drop since October 2009, when prices slid 8.1% and have been falling since January 2013. Excluding crude and mineral oil products, import prices decreased 4% from same period of last year, and import prices of energy plunged 30.8%. On a monthly basis, the picture of import prices was also worse than expected as prices slid by 0.1% confounding expectations for a 0.3% rise and March's 0.7% gain. Moreover, at the same time, export prices fell 2% annually in April, following a 1.6% decrease in March, and on month-on-month basis, the export price index fell 0.1%. In addition, a separate report showed that French household consumption expenditure on goods was virtually stable in April 2016. The continent's second largest economy saw its consumers increase their volume of spending by 0.2% last time. Another rise, this time of 0.1% is on the cards. Moreover, expenditures on energy as well as on durables slowed down sharply, while consumption of food products dropped markedly.
Australian building approvals increased for a third consecutive month during the April, thus spurring doubts on the relatively common opinion that residential construction will slow in the future years. According to the Australian Bureau of Statistics, approvals advanced 3% to 20,243 after seasonal adjustments, and were better than market expectations of a plunge of 3%. This figure was 0.7% higher than levels of a year earlier, as well as was the highest monthly total since October 2015. The strength of the release was mainly affected by private sector excluding houses — namely apartments — which soared 8.1% reaching 10,548, thus reimbursing a decrease in private sector housing approvals which plunged 1.9% slipping to 9,695. Overall, the following data shows there were more apartments than freestanding houses approved in April. Following situation had never been seen before. Another data, which was also revealed by the Australian Bureau of Statistics, showed that Australia's current account deficit narrowed to a seasonally adjusted -$20.79 billion in the first quarter from the fourth quarter of last year. Economists, in turn, had expected a current account deficit of $19.5 billion in the quarter. Meanwhile, the fourth quarter deficit was upwardly revised to $22.63 billion from the $21.11 billion initially reported.
Upcoming fundamentals: Busy European session ahead
The French consumer price index will be published among the first fundamental indicators that are due in Europe on Tuesday. It will be released by 6:45 GMT. Germany's labour market data is out at 7:55 GMT. The month-on-month change in the number of unemployed persons is estimated to fall down by 5,000 in May after a drop of 16,000 in April. By meeting the expectations, the indicator should keep the rate of unemployment in Germany at the present level of 6.2%. A bunch of Euro zone's data is going to be released at 9:00 GMT, with monthly inflation and unemployment rate up for a scheduled revision. Deflation in the common currency area is anticipated to ease to -0.1% from -0.2% on a yearly basis in May.
EUR/USD keeps targeting 200-day SMA
Daily chart: EUR/USD recovered from the 1.11 mark on Monday, after shortly touching the major support represented by the 200-day SMA down there. Over the session the pair gained about 25 pips overall; however, we foresee more weakness in the upcoming future. EUR/USD will highly likely face some downside momentum generated by the weekly pivot at 1.1155, which is immediately succeeded by the sharp May downtrend and the 100-day SMA. Just a close above all of them will refresh the possibility of a spike back to the 1.12 area. Daily technical indicators continue backing the Euro's losses.Daily chart
Hourly chart: Although from the perspective of the 1H chart the yesterday's rebound of EUR/USD looks reasonable, the currency pair is unlikely to grow for a long period of time. The first and foremost resistance is the 200-hour SMA at 1.1177. On top of that, the bulls are inevitably going to face the late-May downtrend at about 1.1195. When hitting them, the pair is expected to observe an increased pressure from the bearish side.
Hourly chart
SWFX sentiment pulls back into bearish zone
OANDA market sentiment turned bearish again, as the number of short positions rose to 51% by the May 31 morning. Alongside, SAXO Bank traders are maintaining the short view in more than 59% of all cases.