- SWFX market sentiment is 52% bearish
- Pending commands in the 100-pip range 54% long
- Pair dropped below the 1.12 level on Thursday
- Aggregate daily technical indicators bet EUR/USD will appreciate
- Economic events to watch over the next 24 hours: EU Current Account (April); ECB's Coeure Speech; US Housing Starts (May); US Building Permits (May); ECB's Draghi Speech
The final estimate of the single European region inflation in May showed that consumer prices plunged 0.1% on a yearly pace in May, having slowed its pace of decrease after April's steep drop of 0.2%. Meanwhile, this was the second consecutive decline in prices. From April to May period, the CPI, in turn, added at a pace of 0.4%, quicker than the 0.3% forecasted. The final data was in line with flash estimate released on May 31. The core CPI data was at an annualized growth rate of 0.8%, hire compared to the April reading of 0.7%. On a monthly pace, core CPI added 0.2% versus the 0% increase in April. In the meantime, the EU's statistics agency highlighted that restaurants, rents and tobacco prices push inflation higher while fuel, heating oil and gas, in contrast, had the negative impact. The negative interest rate within the Euro zone region has failed to preserve hopes of inflation, despite President Mario Draghi statements that he and other senior bank officials are convinced that the measures are working. It is worth to point out, that inflation has remained in negative territory during the first half of 2015, but after rising in the second half of the year, it has weakened again in 2016.
US Federal Reserve was forced to keep the target range for the Federal Funds rate flat at 0.25-0.50% after its June 14-15 meeting, owing to continuous risks to economic outlook and stagnating inflation expectations. Domestic data has been uneven recently, with mild payrolls report considered to be the key trigger for accepting the status-quo. All member of the Federal Open Market Committee (FOMC) voted for the decision, with Kansas City Fed President Esther George abandoning her hawkish call to raise the benchmark by 25 basis points. Janet Yellen, the Chair, agreed that there are some downside forces to interest rates that may be longlasting. On the short-term basis, she admitted that the upcoming UK referendum on EU membership has weighed on the Fed's decision to postpone the upward revision to the Fed Funds target range. The famous dot plot, which reveals individual members' perceptions of how interest rates are going to evolve in the future, showed that participants continue eyeing two interest rate hikes in 2016 and three in 2017. The terminal rate for the long run has shifted down to 3% from 3.3% in the March projection. The Fed estimates a 2% GDP growth every year during 2016-2018, also reflecting a moderate downward change in the outlook. Consumer prices, measured by the PCE Index, however, are forecasted to increase 1.4% this year. This indicates to an improvement from 1.2% seen three months ago.
Upcoming fundamentals: EU current account, ECB speeches and US construction
Today most impact on the Euro will be done by ECB speakers, as Coeure is set to give a speech at 11:45 GMT and Mario Draghi will give a speech at 15:00 GMT. In addition from the EU side, the European Union's current account for April is set to be published at 8:00 GMT. Experts forecast, that the current account will again be positive, and the forecasted, seasonally adjusted number is 24.7 billion euros. From the US, the Housing Starts and Building Permits data will be published at 12:30 GMT for the period of May.
EUR/USD continues to fluctuate around 1.125
Daily chart: The European currency appreciated against the US Dollar on Thursday. With it, the pair continued this week's constant fluctuation around the 1.125 level between the monthly pivot point at 1.1282 and the first weekly support at 1.1192. Both sides were supported by additional supports and resistances. The monthly pivot point lead upside is also enforced by the weekly pivot point and 55-day SMA at 1.1304, and the support received reinforcement from the 100-day SMA at 1.1227. In the meantime, aggregate technical indicators predict an appreciation for the pair.Daily chart
Hourly chart: The hourly chart shows and interesting image for yesterday, as it can be seen, that during the day the Euro was highly volatile against the US Dollar. Around 6:00 GMT the currency exchange rate started depreciating from 1.1287, and in only eight hours the rate had already down to the 1.1131 level, which is below the exchange rate that the pair was before the disappointing US non-farm payrolls data on June 3. However, the pair quickly regained strength, and it was at 1.1270 by 23:00 GMT. On Friday morning the Euro has depreciated to 1.1250 against the Greenback.
Hourly chart
SWFX traders are bearish on Friday
OANDA trader bearish sentiment has increased compared to Thursday, as 57.40% of open positions are short. However, SAXO Bank clients have decreased their bearish stance, as their open short positions are now at 60.38% compared to 62.20% 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 17 and June 17 expect, on average, the currency pair around 1.12 by the end of August. Though 44% (-1%) of participants believe the exchange rate will be generally below 1.12 in ninety days, with 26% (+1%) alone seeing it below 1.08. Alongside, only 28% 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
61.1% of the Dukascopy Community members are expecting a surge in the value of the Euro against the Greenback by the end of this working week. The median estimate for June 17 stands slightly at 1.134. Among traders, nuonrg suggests that "The Euro closed the week below 4h momentum. We might get a squeeze lower into the daily trend line before trying higher prices".
At the same time, trader megajorko is bearish stating that "After returning to previous levels and breaking all supports possible the pair is again in bearish mode with possibility to reach new lows on Fed interest increase. The start of the big spike up was due to lower than expected NFP number but with this effect fading out I believe that 1.14 was the top for the pair for a long time".