- SWFX market sentiment is 60% bearish
- Trader pending orders are 61% to sell
- Pair opened Tuesday's session at the 1.253 level
- Aggregate daily technical indicators bet EUR/USD will surge
- Economic events to watch over the next 24 hours: Euro Zone M3 Money Supply; US CB Consumer Confidence; FOMC Member Fischer Speaks
German business sentiment rose more than expected in September, reaching the highest level in more than two years despite the economic uncertainty caused by Britain's vote to leave the European Union, survey results from the Munich-based Ifo Institute showed on Monday. The Ifo Business Climate Index jumped to 109.5 on a monthly seasonally adjusted basis in September, while market analysts expected the Index to come in at 106.3 in the reported month. Meanwhile, the preceding month's reading was revised up to 106.3 from the originally reported 106.2 points. According to the Ifo's sub-survey, the Current Assessment Index, which measures current conditions in the Euro zone's largest economy, came in at 114.7 in September, following the previous month's 112.9 points and surpassing the 113.0 market forecast. Furthermore, the Business Expectations Index, indicating companies' outlook for the next six months, increased to 104.5 month-over-month in September from August's 100.1, compared to analysts' projections for a reading of 100.2 points. After the release, the Euro rose against the Greenback and British Pound, trading at $1.1240 and £0.8690, respectively.
According to the official figures, industrial production across the 19-country Euro zone slipped by 1.1% in July, showing a development that could seriously weigh on the region's third-quarter growth. It is worth to point out that industrial production in the single currency region has been highly volatile for the last months, jumping in some and slumping in others. But overall, during the last 12 months it has declined, a key source of weakness for the UK economy that has struggled to create jobs and now are facing strong uncertainties after the UK's June vote to leave the European Union. In the meantime, the production of capital goods decreased by 1.7%, while energy production was 1.4% lower and durable consumer goods production lost 0.7%. The production of intermediate goods, in turn, was down 0.5% while production of non-durable consumer goods was unchanged.
Upcoming fundamentals: US CB Consumer Confidence
Bearish momentum could suffer from a satisfying M3 Money Supply announcement for the Euro Zone at 8:00 GMT, while US CB Consumer Confidence is bound to induce more volatility at 14:00 GMT Tuesday Afternoon. A series of low impact data releases on the United States' economy, such as Flash Services PMI and Richmond Manufacturing Index could accumulate surprise waves to add some more uncertainty to the markets.
EUR/USD fails at 1.1253
Daily chart: EUR/USD took up where it left off on Tuesday, proving levels above 1.1253 out of reach with a red candle half the size of Monday's green one. The pair's way south would be a rocky one, if the bullish momentum is indeed captured, presenting 1.1190/88 as the first serious obstacle. Levels 1.1170 and 1.1155 could cause some real trouble, as the SMAs they represent have before, causing levels below to become less attractive. We would, however, expect the current resistance to be broken over the next few days to complete the journey towards 1.1275, where the rate would finish the correction of the broken channel trend-line it has been undergoing for almost two weeks already.Daily chart
Hourly chart: While the pair awaits a retracement on the daily chart, the hourly one shows that it has undergone two already, suggesting, that the motion north has been established for good. The nearest target would then lie at 1.1233 with further demand pressures at 1.1214. Both 100-hour and 55-hour SMAs have crossed the 200-hour SMA from the downside, suggesting that bullish momentum still remains strong. If the pair does still need a confirmation of the broken trend-line, 1.1262 will cause a hitch on the way to the 1.1276 broken wedge bottom trend-line.
Hourly chart
Market sentiment strongly bearish
The bearish sentiment has remained stable among SWFX traders, as 60% of open positions are short on Tuesday. Pending orders have not shown any change as well, showing that 39% of outstanding commands are long.
OANDA traders have shown a sharp increase in their bearish sentiment, as 57.02% of open positions are short. In addition, SAXO Bank clients have also increased their bearish stance, as open short positions now add up to 67.18% compared to 62.93% on the previous trading session.