- Market is split almost equally between EUR/USD's bulls and bears
- Neutral pending orders in 50 and 100-pip ranges add to uncertainty
- Volatility is expected to surge by Thursday's ECB meeting; the Euro is likely to depreciate
- Daily technical indicators are mixed on Monday morning
- Economic events to watch in the next 24 hours: German Retail Sales (Oct) and CPI (Nov); Italian CPI (Nov); US Pending Home Sales (Oct), Chicago PMI (Nov) and Dallas Fed Manufacturing Index (Nov)
French consumer spending dropped the most in seven months in October, while the unemployment rate rose to a new record, adding to signs that a recovery in the Euro zone's second biggest economy failed to gather steam. According to the INSEE, consumer spending declined 0.7% last month from September, the weakest level since March, driven by a 3.4% plunge in new car sales. Adding to dim data, the number of unemployed surged by 42,000 in the reported month to a total of 3.58 million. President Francois Hollande's government is hoping that the French economy can achieve growth of at least 1.5% next year, the minimum necessary to get unemployment falling. Meanwhile, confidence in the Italian manufacturing sector continued to fade in November. The manufacturing sector confidence index declined to 104.6 in the current month, down from the revised 105.7 in October. The manufacturing PMI climbed to 54.1 last month. At the same time, the Greek economy shrank both on an annual and quarterly basis in the three months through September. Greece's third quarter GDP declined 0.9% on quarter, down from the 0.4% growth in the April-June period. In annual terms, the economy posted the same decline, after the 1.3% rise.
New Zealand business confidence surged to the highest level in six months in November, suggesting economic activity and hiring may soon start to gather steam. A net 14.5% of firms were confident that business conditions would improve over the next 12 months, compared with a net 10.5% that voiced optimism in October, according to the ANZ Business Outlook survey. Companies were also upbeat about their own outlook, with a net 32% of firms expecting their own activity to expand in the coming year, up from a net 23.7% in October. The service sector appeared to be the most optimistic, with the confidence in the outlook for the economy strengthening to a net 26.7% from 18.3% last month. At the same time agriculture was the most pessimistic, with a net 12.5% of businesses voicing downbeat mood. While the New Zealand economy has been struggling due to slower housing market in Auckland and Christchurch, a surplus of labour and low dairy product prices, it is being supported by record tourism and migration, housing market strength outside of Auckland as well as lower New Zealand Dollar. The Reserve Bank of New Zealand has slashed interest rates three times since June in an effort to support the economy and inflationary pressure. Yet, economists see further stimulus as imminent.
Upcoming fundamentals: German inflation to increase along with US pending home sales
Preliminary data on consumer prices in Germany is due on Monday. Analysts foresee an annual reading of 0.1% in November, up from zero we observed in October. On the other hand, economists project that Italy's consumer prices have declined by 0.2% in November on a monthly basis. American statistics includes the Chicago PMI (14:45 GMT) and pending home sales (15:00 GMT). The former is estimated to decline from 56.2 to 54.3 points in November. However, average expectations assume that US home sales increased by 1.6% in October, following a drop of 2.3% in the preceding month.
EUR/USD prepares for Super Week below 1.06
EUR/USD is getting ready for sharp losses by the end of a new trading week, in case the ECB announces more stimulus on Thursday. By now all movements remain muted and follow a little volatile development of the previous week. Bears are setting eye on 1.0519 (April low) in the near term, which is reinforced by weekly S1, monthly S2 and lower Bollinger band. However, we expect the cross to pierce through 1.05 by the second half of the week. However, daily and weekly indicators preserve mixed views on the matter.Daily chart
In the one-hour chart, the currency pair continues to hover between two major trend-lines. Additional downward pressure should be created by 200-hour SMA, currently at 1.0642. Upcoming dovish week for the Euro will most likely lead to a confirmation of 1.05 (lower downtrend) in the next few days.
Hourly chart
SWFX sentiment shows no signals of either bullish or bearish lead
In the meantime, OANDA's bulls increased their lead over bears in the past 72 hours. Despite expectations that the Euro can tumble substantially this week, the bullish OANDA share climbed up to 54.2% by Monday morning. Alongside, SAXO Bank clients are bearish in 55% of all cases today, no change over the weekend.