EUR/USD recoups on Monday

Source: Dukascopy Bank SA
  • SWFX market sentiment is 53% bearish
  • Pending commands in the 100-pip range 63% short
  • Pair opened Tuesday's session at the 1.1084 level
  • Aggregate daily technical indicators bet EUR/USD will depreciate
  • Economic events to watch over the next 24 hours: EU Bank Lending Survey; German ZEW Survey (July); US Building Permits (June); US Housing Starts (June); Consolidated Financial Statement of the Eurosystem
The common European currency on Monday regained half of its Friday's losses against the US Dollar. However, on Tuesday the pair is trading flat, as traders expect information from the EU, as EU Bank Lending Survey and the Consolidated Financial Statement of the Eurosystem. Previously the Euro started Friday with a surge, which did not continue into the day, as the EUR/USD pair fell, erasing all gains gained since June 28 and marking a new July low.

On Thursday, the Bank of England surprised markets by holding interest rates, despite hints from Governor Mark Carney that policy easing could be possible made earlier. Economists had expected a rate cut of 25 points to 0.25%, which would have been the first rate change in seven years. Following assumptions appeared after the Brexit referendum on 23 June, when Britons widely vote to leave the European Union. According to the minutes of the meeting, the Bank's Monetary Policy Committee voted by 8-1 to hold rates, as well as hinting that they "expect monetary policy to be loosened in August". Moreover, the BoE announced in its policy statement that they would give another month to evaluate the Brexit's impact on the economy and probably would raise stimulus measures in August. Currently, the bank's benchmark rate equals 0.5%. Following decision is widely appreciated by economists, since many experts are saying the Bank made the right decision by leaving interest rates unchanged. In the meantime, the Pound advanced while shares, in turn, dropped after the Bank of England unexpected decision. The Cable added around 1.4%, or two cents, versus the dollar reaching $1.3326.

Euro zone industrial production markedly worsened and even missed estimates in May, giving back almost all of the gains recorded the previous month in a fresh indication that an economic recovery which is now in its fourth year remains modest and vulnerable to new setbacks. According to the European Union's statistical office Eurostat, output in manufacturing, mining and utilities in the 19-nation bloc rose 0.5% year-on-year during the fifth month of the year, down from the 2.0% upturn seen previously. Analysts anticipated a deceleration to 1.4% growth in May. Industrial production across the 19 countries that share the euro has been highly volatile over recent months, jumping in some and slumping in others. Moreover, the indications for the second quarter are not encouraging, and consistent with other signs that growth was slowing even before the U.K. voted to leave the European Union on June 23, creating a period of uncertainty that the European Central Bank expects will slow the recovery. Many economists estimate the Euro zone economy slowed during the three-months to June, growing by between 0.3% and 0.4% after recording an expansion of 0.6% in the first quarter. However, a further slowdown seems likely over coming months.

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Upcoming fundamentals: ZEW Survey, Eurosystem statement and US construction

Contrasting the quiet Monday, Tuesday will bring in a lot of data from the EU and the US. However, main attention is aimed at the data coming out of the EU, as first of all at 8:00 GMT Bank Lending Survey results will be released. Later in the day the Consolidated Financial Statement of the Eurosystem will be published at 13:00 GMT. In the meantime, Germans are also going to influence the EUR/USD pair, as the ZEW Survey will be published at 9:00 GMT. Data that will influence the US Dollars strength by indicating at the conditions in the US economy on Tuesday will be the construction numbers. Building permit data will be released at 12:30 GMT, and this release will come out together with the Housing Starts for June published at the same time.



EUR/USD recovers to 1.1076 on Monday

Daily chart: The common European currency erased everything regained against the US Dollar in July on Friday, as the currency exchange rate marked a monthly low at 1.1029. However, on Monday morning the pair started day's trading session higher at 1.1044, and it reached above the weekly PP at 1.1070 by ending Monday's trading session at 1.1075. On Tuesday morning the pair had not moved, as it was trading at 1.1075 by 5:00 GMT.

Daily chart
© Dukascopy Bank SA

Hourly chart: The hourly chart shows that the EUR/USD pair, after the huge fall of Friday, surged until it reached the weekly PP at 1.1070 by 6:00 GMT on Monday. However, the currency exchange rate did not move past the resistance put up by the pivot point, and it declined to 1.1043 by 9:00 GMT. Afterwards, the pair went in for another test of the resistance, and on the second try the weekly pivot point's resistance was broken. Since then, the currency pair has been bouncing between the 200-hour SMA around 1.1077 form the upside and the before mentioned pivot point below.

Hourly chart
© Dukascopy Bank SA


SWFX sentiment unchanged on Tuesday

SWFX traders have not changed their bearish sentiment, as 53% of all open positions remain short on Tuesday. In the meantime, pending orders in the 100-pip range have slightly shifted to the bullish side, as 63% of pending orders are short, compared to 67% on Monday.

OANDA trader bearish sentiment has increased compared to Monday's 55.65%, as, at the moment, 56.16% of OANDA open positions are short. In addition, SAXO Bank clients have also increased their bearish stance, as their open short positions are now at 58.68% compared to 55.71% of last trading session.

Spreads (avg,pip) / Trading volume / Volatility



Average forecast says EUR/USD will trade at 1.10 by October

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between June 19 and July 19 expect, on average, the currency pair around 1.10 by the end of September. Though 61% (-1%) of participants believe the exchange rate will be generally below 1.12 in ninety days, with 38% (-2%) alone seeing it below 1.08. Alongside, only 25% of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on September 30.

© Dukascopy Bank SA

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