- SWFX market sentiment is 54% bearish
- Pending commands in the 100-pip range are neutral
- Pair retreated from the 1.14 level on Thursday
- Aggregate daily technical indicators bet EUR/USD will surge
- Economic events to watch over the next 24 hours: Bundesbank President's Weidmann's Speech; Italian Industrial Production (April); US UoM Confidence Preliminary (June);
For the previous month, Germany's trade balance advanced unexpectedly. According to the Federal Statistics office, Germany recorded a headline of 25.6bn euros for April from 21.8bn euros in April 2015. The seasonally-adjusted surplus increased to 24bn euros from a revised 23.7bn euros in May, compared with an expected decline for the month. Moreover, the adjusted surplus was at a record high and will resume supporting the single European currency. The overall German current account surplus expanded to 93.9 billion euros for the first quarter of 2016 from 79.8 billion euros the previous year despite a slight widening in the services deficit. Meanwhile, analysts had expected Germany's trade balance to plunge to 23bn euros last month. Meanwhile, German exports went up by 3.8% in April compared to the same month a year ago, while imports remained nearly unchanged and as a result have led to a wider trade balance for Europe's most powerful economy. Overall, German exporters have strong global position on competitiveness grounds, which will continue to underpin the trade surplus in the short term. Moreover, the surplus will also make it challenging for the ECB to push the Euro substantially weaker even taking into account the quantitative easing programme.
According to the data published earlier on Thursday Chinese inflation is experiencing continuing increase in producer prices during the previous month. The officials shows, PPI advanced 0.5% on a monthly basis in May, posting the third monthly increase, thus pushing the annual rate up to -2.8 %, consensus was at -3.2% on the yearly basis from -3.4% in April. Meanwhile, Chinese producer prices are mainly affected by commodity prices while current increase in the following data PPI is a simple reflection of higher metal prices at the beginning of current year. Moreover, the advance of producer inflation is positive for industrial profits which are now forecasted to have remained positive in May. The CPI inflation released on the same day, in turn, surprised on the downside in May, slipping to 2.0% on the yearly pace, from 2.3% in April. This data, was influenced by lower food prices, since inflation in vegetable prices has accelerated. Inflation excluding food was unchanged and remained at 1.1%. The official CPI rate went up to 2% in the 12 months through May, down sharply from 2.3% in April. In the meantime, on Wednesday markets confirmed that the country's exports dropped in May for the third time in four months, confirming that major global economy continue to suffer from weak demand.
Upcoming fundamentals: Bundesbank president's speech and US consumer confidence
Compared to yesterday, Friday is set out to be a calm day for EUR/USD pair affecting fundamentals. First of all, Bundesbank president Weidmann is set to speak at 7:00 GMT at the Bundesbank Spring Conference. The other major data release will be the University of Michigan Confidence surveys preliminary results for June at 14:00 GMT, which will indicate at the possible future increase or decrease of US consumer spending. In addition, the Italian production month-to-month change will be published by ISTAT at 8:00 GMT.
EUR/USD retreats from 1.14 on Thursday
Daily chart: After the Euro scored gains against the US Dollar and passed the 1.14 level on Wednesday, the pair retreated on Thursday and fell to 1.13. Main reason for the depreciation of the European currency was Mario Draghi's gloomy warnings of EU being at lasting economic damage risk. However, some profit takers might have affected the currency exchange rate also, as many took out profits, as the pair had surged since last Friday's US non-farm payrolls data release, which made the Euro spike against the Greenback. At the moment, the pair has just passed the 55-day SMA and it is moving towards the monthly and weekly pivot points around 1.1280.Daily chart
Hourly chart: In the meantime, the hourly chart shows that the Euro against the US Dollar has stopped bouncing back and forth between the upper Bollinger band and various supports below. On the start of Thursday, the pair reached again the upper Bollinger band and retreated back to the lower band and 55-hour SMA. However, this time the currency exchange rate did not find support in them, but broke through and fell sharply. In the meantime, aggregate technical indicators predict a surge for the pair today.
Hourly chart
SWFX traders continue bearish sentiment on Friday
OANDA market sentiment is more bearish today compared to yesterday, as 60.58% of open positions are short. However, SAXO Bank clients have decreased their bearish stance, as their open short positions are now at 64.01% compared to 68.02% yesterday.
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade at 1.12 by August
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between May 10 and June 10 expect, on average, the currency pair around 1.12 by the end of August. Though 51% (-3%) of participants believe the exchange rate will be generally below 1.12 in ninety days, with 31% (-1%) alone seeing it below 1.08. Alongside, only 23% (-1%) of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on August 31.Dukascopy Community members are bearish on this week's perspectives of EUR/USD
56.6% 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 June 10 stands slightly above 1.12. Among traders, Khimitau suggests that "After a 20 days down trend the pair has found support around 1,13 and a strong contra trend move is visible. Thought I am expecting a trend continuation with the pair reaching the EME(20) around 1.128".
At the same time, trader megajorko is bullish stating that ""There is a big probability of a big opening gap due to the absolute surprising NFP. Technicals show that channel down is still intact and only the time can show if this is true".