- SWFX market sentiment is 62% bearish
- Trader set up pending orders are 65% short
- Pair opened Monday's session at the 1.1175 level
- Aggregate daily technical indicators bet EUR/USD will surge
- Economic events to watch over the next 24 hours: Italian Confidence Index in Manufacturing (August); US PCE Price Index (July); US Personal Income (July); US Personal Spending (July)
The UK economy grew more than expected in the Q2, despite the country's decision to leave the European Union, official data showed on Friday. According to the Office for National Statistics (ONS), the UK GDP advanced 0.6% during the reported period, compared to the preceding quarter's 0.5% rise. On an annual basis, GDP expanded 2.2% in the Q2 of 2016. Both reading came in line with analysts' expectations. The data also showed that services and production jumped 0.5% and 2.1%, respectively in the Q2. In Contrast, construction dropped 0.4%, whereas agriculture fell 1.0%. Furthermore, household consumption increased 0.9% over the Q2, rising for 6 consecutive quarters. Year-over-year, household consumption climbed 3.0% in the reported quarter. Government spending declined 0.2% on a quarterly basis, but increased 0.8% on a yearly basis. Investment was the largest component of Britain's GDP in the Q2, growing 1.4% quarter-over-quarter and 0.9% yearover-year. Despite promising UK retail sales figures and the lowest unemployment rate since June 2008, the Brexit vote negatively affected business and consumer confidence, as the manufacturing activity gauge fell to the lowest level since 2013 and the services activity dropped to its lowest level since 2009.
The US economy expanded less than initially estimated in the Q2 of 2016, fresh data revealed on Friday. According to the second estimate released by the Commerce Department, the US GDP grew 1.1% over the Q2, whereas the first estimate suggested that the economy rose 1.2% in the reported quarter; however, the reading came in line with market forecasts. The US economy grew 0.8% in the Q1 and 1.0% in the first half of 2016. The downward revision was mainly driven by higher imports and weak spending by state and local governments. Meanwhile, Personal consumption growth was revised up to 4.4% from 4.2% reported earlier, the fastest pace since the Q4 of 2014. The data showed that corporate profits dropped 1.2% in the Q2, following the 3.4% gain seen in the Q1. Core personal consumption expenditures, which exclude volatile food and energy prices, rose to 1.8% from 1.7%. Separate data released by the Commerce Department showed the US trade deficit fell to a seasonally adjusted $59.3 billion last month, compared to June's $64.5 billion gap, whereas market analysts anticipated a slight drop to $62.3 billion in July. Exports jumped $2.9 billion, while imports declined $2.4 billion. Wholesale inventories rose 0.2% month-over-month and 0.3% year-over-year. Retail inventories fell 0.4% on a monthly basis, but increased 4.2% on an annual basis.
Upcoming fundamentals: Italian manufacturing and US spending
On Monday data affecting the EUR/USD pair will come from both sides of the Atlantic. However, to be precise, it will be incoming from the Italian peninsula and the United States of America. First will be the Italians at 8:00 GMT, as they will publish the countries Confidence Index in Manufacturing for August. Afterwards, at 12:30 GMT the US PCE Price Index for July will be released, as an annual change in percentage, and the core of the index will be out as a month-to-month and also annual change. At the same time, two more numbers will be published, as the US Personal Income and Personal Spending monthly changes for July will be out.
EUR/USD at 1.12 mark on Monday morning
Daily chart: The common European currency depreciated against the US Dollar on Friday, as chairwoman of the Federal Reserve, Janet Yellen indicated at two not only one rate the central bank's rate hikes until the end of this year. Although, the pair opened Monday's trading session at 1.1174, it surged afterwards to 1.12 mark and is most likely to continue to recover the previous losses. Janet Yellen's speech seems to have provided a buying opportunity for the bulls.Daily chart
Hourly chart: The hourly chart for the EUR/USD pair shows that the pair traded flat on Friday morning, as it was squeezed in between all of the SMAs and Bollinger bands due to gradual loss of volatility, as the Jackson Hole Symposium was happening, and market participants were expecting Janet Yellen's speech. Afterwards, during the talks, the Euro even reached above the 1.1340 mark against the US Dollar at one moment. However, afterwards the pair fell as a rock and reached the 1.1180 level. Since then, it has been very slowly recovering.
Hourly chart
Trader sentiment unchanged on Monday
OANDA trader bearish sentiment has decreased compared to Friday's 64.80%, as, at the moment, 58.02% of OANDA open positions are short. In addition, SAXO Bank clients have also decreased their bearish stance, as their open short positions are now at 63.42% compared to 69.35% of last trading session.