- SWFX market sentiment is 55% bullish
- Trader pending orders are 60% to sell
- Pair opened Friday's session at 1.0413
- Economic events to watch over the next 24 hours: EU final CPI; US building permits; US housing starts
US consumer prices rose at a slower pace last month compared with October but the underlying inflation trend remained promising. On Thursday, the US Department of Labor said its Consumer Price Index advanced 0.2% in November after rising 0.4% in the preceding month as food costs moderated and the price of gasoline fell. On an annual basis, the CPI climbed 1.7%, the largest increase since October 2014, following the previous month's 1.6% gain. Analysts expected the CPI grow 0.2% on a monthly basis and 1.7% compared to a year ago in the reported month. Meanwhile, the so-called Core CPI jumped 0.2% in November after climbing 0.1% in October, driven by higher rents. Despite last month's increase, the annual core inflation rate held steady at 2.1%. Other data released on the same day showed the US Philly Fed Index jumped to 21.5 in November, up from October's 7.6 and well above forecasts of 9.1 points, whereas the Department of Labor reported the number of initial claims dropped 4,000 to 254,000 in the week ending December 10, compared to the preceding week's 258,000. After the release, the US Dollar was seen trading at 1.0419 against the Euro, 117.99 against the Japanese Yen and 1.2470 against the British Pound.
The Euro zone's bond markets tumbled shortly, while the Euro moved markedly higher after the European Central Bank signalled on Thursday that it would begin to cut back the stimulus program starting from April 2017. The ECB said it would lower its 80 billion euros monthly asset purchases to 60 million euros but prolong the QE asset buys until December next year., pointing to low inflation that, according to the latest forecasts, was projected to achieve only 1.7% in 2019. In the meantime, market analysts expected the Central bank to leave its asset purchases at the current levels for 6 more months. The Bank bought 1.4 billion euros in bonds since the start of the QE program. The ECB kept its inflation forecast unchanged at 0.2% for 2016 but revised it slightly up to 1.3% and 1.5% for 2017 and 2018, respectively. The Bank also left its benchmark and deposit rate at 0.0% and –0.4% , respectively, in line with economists' expectations. Overall, the Euro zone's recovery remained solid despite Britain's decision to leave the European Union and Donald Trump's surprise victory in the US presidential elections. After the announcement, the Euro initially jumped to 1.0875 against the US Dollar but failed to hold the momentum, falling back to 1.0753.
Upcoming fundamental releases: US EU final CPI; US building permits; US housing starts
There will likely be little pressures from fundamental releases that could shake up the EUR/USD market. Medium impact data, such as the EU final CPI and US housing starts coming out at 10:00 GMT and 13:30 GMT respectively, will serve as a warm-up for higher impact news, namely US building permits which could cause some surprise movements if targets are not met.
EUR/USD still stronger than 1.0419
Daily Chart: Following an attack at the 1.0419 level, the pair confirmed its significance with a reversal Friday morning. Immediate resistance now lies at 1.0453 and is likely to steal some momentum from the upward motion. While a green candle at closing is quite a credible scenario for EUR/USD, the pair is still on a streak of losses both short and long term, as it makes its way towards the bottom trend-line of the two-month descending channel. The pair has currently set ground at the aforementioned 1.0419 level with more risk at 1.0313/04.Daily chart
Hourly chart: The hourly chart shows the pair gradually surging towards the upper Bollinger Band at 1.0470. Because it has overstepped the 20-hour SMA just moments ago, it is possible that a consolidation will now extend for a few hours. Having set a floor at 1.0374 on the hourly chart, EUR/USD appears to have successfully distanced itself from levels as low and the initiated reversal now seems sustainable – at least for the next hours. The 55-hour SMA now provides more solid resistance and is a reasonable target in case bulls preserve their leadership.
Hourly chart
Sentiment remains bullish
SWFX traders mitigated their bullish sentiment to show 55% of all positions being long, compared to 58% on Thursday. Pending orders, however, showed a little less pessimism with 60% (-5%) of shorts.
OANDA traders decreased their bullish outlook, as 55.59% of open EUR/USD positions were long on Friday morning, compared to 60.21% on Thursday. Additionally, SAXO Bank clients have remained in a slightly optimistic territory with 50.38% of all positions being bought, compared to 51.15% on the previous trading session.