- SWFX market sentiment is 60% bearish
- Trader pending orders are 54% to sell
- Pair opened Monday's session at the 1.1230 level
- Aggregate daily technical indicators bet EUR/USD will surge
- Economic events to watch over the next 24 hours: German Ifo Business Climate (Sep), US New Home Sales (Aug), Draghi's Speech.
In September, business activity in the Euro zone grew at the slowest pace since the beginning of 2015, official figures showed on Friday. According to Markit Economics' preliminary report, the flash composite Purchasing Managers' Index (PMI) for the region dropped to 52.6 from August's 52.9 points, falling behind the 52.8 market forecast. Furthermore, the preliminary services PMI declined to 52.1 from last month's 52.8. Economic desks expected the Index to remain unchanged from the previous month. However, the flash manufacturing PMI rose to 52.6 in September from August's 51.7, while analysts anticipated a slight deceleration to 51.5. In a separate report, Markit Economics said Germany's flash composite PMI plunged to 52.7 points in September, following last month's 53.3 and missing the 53.3 forecast. Moreover, the preliminary services PMI for the Euro zone's largest economy fell to 50.6 from August's 51.7, whereas economists penciled in anacceleration to 52.2 during the reported period. Nevertheless, the country's flash manufacturing PMI jumped to 54.3 in September, compared to the previous month's 53.6, while economic desks expected the indicator to come in at 53.2 in the reported month.
Consumer prices in the United States rose more than expected last month, official data revealed on Friday. According to the US Bureau of Labor Statistics, the overall Consumer Price Index (CPI) jumped 0.2% month-over-month in August, compared to the preceding month's reading of 0.0%, while market analysts anticipated a slighter acceleration to 0.1% during the reported month. On an annual basis, the CPI increased 1.1%, up from July's 0.8%. The so-called core CPI that excludes goods with high price volatility, such as food and energy, advanced 0.3% on a monthly basis in August after rising 0.1% in July, whereas economic desks expected the core inflation to grow 0.2% last month. On a yearly basis, the indicator climbed 2.3% during the reported period, slightly up from July's 2.2% reading. The modest rise in inflation last month is likely to be welcomed by the Federal Reserve at its meeting Tuesday and Wednesday. However, it is widely expected to leave interest rates on hold amid weak retail sales, industrial production and job growth. Within the headline CPI basket, the price of gasoline dropped 0.9% last month, compared to July's 4.7% fall. Food prices were unchanged, whereas the cost of food consumed at home decreased for the 4th consecutive month.
Upcoming fundamentals: German Ifo Business Climate
While Monday has failed to show any volatility whatsoever, high impact fundamental releases are bound shake the markets significantly. The German Ifo Business climate could cause some surprise shocks at 8:00 GMT, while fluctuations in the Dollar value will cause uncertainty at 14:00 GMT when the US New Homes Sales come out. The afternoon session will do little to calm the markets as Draghi's Speech at 15:05 GMT is likely to play around with the pair's value some more.
EUR/USD consolidation in progress
Daily chart: A break out of the two-month ascending channel has caused a traditional retracement towards the broken lower trend-line, meaning that 1.1258 still remains the ultimate target for the next few days. With no resistance on the way to the trend-line, the rate will bounce to the downside, with 1.1207 as its next target, leaving little to 1.1201 where the weekly Pivot Point lies. Tougher resistance at 1.1190 could deny access to levels underneath, putting 1.1162 into perspective in case of a breakout. If the rate fails to gather enough strength to complete the motion, levels of significance beneath 1.1226 will be targeted right away.Daily chart
Hourly chart: Developments on the hourly chart, however, imply that EUR/USD could be on its way down already, following a prompt tap at the broken channel trend-line that took place on September 22. In case this is true, the pair will face 1.1218 as the near-term resistance, corresponding to the 55-hour SMA. The 1.1201 level will serve as a footing if the rate gets as low, with strong demand pressures stemming from the confluence of the 200-hour SMA and Weekly Pivot Point. If upward momentum proves stronger, 1.1239 will serve as the single resistance, which is likely to lack strength to hold the rate from potentially closing the day near the 1.1269 resistance level.
Hourly chart
Traders remain bearish
SWFX traders have expressed a more pessimistic outlook, with 60% of open positions are short on Monday, compared to 59% on Friday. In the meantime, long pending commands have advanced from 46% to 54% on Thursday morning.
OANDA traders have become slightly bearish on the pair, as 55.00% of open positions are short. In addition, SAXO Bank clients have considerable increased their bearish stance as well, as open short positions now add up to 67.56% compared to 62.93% on the previous trading session.