- SWFX market sentiment is 53% bearish
- Trader pending orders are 51% to sell
- Pair opened Tuesday's session at 1.0653
- Upcoming Events: US PPI; US Core PPI
The European Central Bank Mario Draghi did not provide any news in terms of monetary policy during his speech on Monday. Back on Friday, sources close to the ECB, reported that policymakers discussed the possibility of raising interest rates before the end of asset purchases but the discussion was brief and light. However, the Euro managed to rise against other major currencies on rate hike rumors. In his speech, Mario Draghi mainly focused on productivity growth in the Euro zone, which, according to him, slowed markedly over the last several years. Draghi suggested that if the non-hightech sector adopts more innovative technology that would provide sufficient support to productivity growth in the region, adding that higher productivity growth is important for the European socioeconomic model that includes higher wages and a greater degree of social protection.
The ECB President also highlighted the benefits of investment in intangible assets, such as R&D, claiming that companies, which invested in intangibles, reflected greater ability to innovate and adopt technologies. Draghi also urged companies to make greater investment in human capital and management, to improve their productivity. Analysts suggest that the ECB is likely to keep its policy unchanged until the end of its QE programme, or March 2018.
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Upcoming events: US PPI
During Tuesday's trading session the fundamental data release to look forward is the publishing of the US PPI data at 12:30 GMT. It will be covered live by the Dukascopy research team on the bank's webinar platform. However, a big move is most unlikely, as markets are focused on the US Federal Reserve meeting, which will take place tomorrow.
Read More: Fundamental Analysis
EUR/USD retreats below 1.0650 level
Daily Chart: During the early hours of Tuesday's trading session the common European currency retreated against the US Dollar. The fall of the currency exchange rate has been stopped by the combined support of the 23.60% Fibonacci retracement level at 1.0639 and the monthly pivot points at 1.0633. From the upside the rate is being pressured by the 100-day SMA at 1.0654. From a technical perspective it can be seen that the rate is gathering pressure before a larger move. That is consistent with the fact that the Federal Reserve short term rate is about to be revealed.Daily chart
© Dukascopy Bank SA
Hourly chart: The hourly chart confirms the hypothesis of a preparation for something, as the Bollinger bands indicate at a reduced volatility in the currency exchange rate. In addition, most recently the currency exchange rate managed to pass the support put up by the 23.60% Fibonacci retracement level, as the pair moved to the monthly PP. It is possible that the result of the Fed meeting will be a surge in the US Dollar. However, it would not be a massive one, as the rate hike is already priced in by the markets.
Hourly chart
© Dukascopy Bank SA
Read More: Technical Analysis
Markets become bearish
SWFX traders remain bearish, as 53% of open positions are short on Tuesday. Meanwhile, 51% of trader set up orders are set to sell the Euro.
OANDA traders remain bearish, as 53.19% of trader open positions are short on Tuesday, compared to 55.37% positions previously. In addition, SAXO bank clients are also on the bearish side, as 54.79% of open positions are short, compared to 58.68% on Monday.
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade around 1.06 in April
Traders, who were questioned on their longer-term views on EUR/USD between February 14 and March 14 expect, on average, the currency pair to trade around 1.06 by the start of April. In general, 50% (-5%) of participants believe the exchange rate will be generally above 1.06 in ninety days, and 12% see it above 1.12. In the meantime, 21% of those surveyed reckon the pair will be at parity or below. © Dukascopy Bank SA