- Sentiment among SWFX traders is bearish, as 57% of all transactions are short
- Orders to buy and sell the Euro have the equal share of 50%
- The pair is likely to hover in a limited range during another holiday week
- Daily indicators are pointing upwards on a daily basis, but change to bearish on a weekly time frame
- Economic events to watch in the next 24 hours: US Goods Trade Balance (Nov) and CB Consumer Confidence (Dec)
The European Central Bank is unlikely to increase the size of the 1.46 trillion euro asset-purchase programme in 2016 despite ECB President Mario Draghi comments that additional monetary stimulus is still on the table, according to an annual Financial Times poll. Unlike the previous year when the overwhelming majority of economists predicted the central bank to deploy full-scale quantitative easing, just under half of respondents expected the ECB to do nothing this year. The rest argued that the central bank would enlarge QE or lower interest rates. Still, some of those who anticipated more easing highlighted that the central bank was unlikely to radically change its current policy response. Meanwhile, ECB executive board member Yves Mersch said that monetary policy could be more accommodative in order to help achieve the inflation target. Mersch also added that QE programme will run for as long as it is needed to sustainably reach ECB's targets. Latest ECB estimates show the Euro zone economy is likely to grow 1.7% in 2016 after expanding 1.5% this year as QE supports the region's economy. Yet, inflation has been below 1% for more than two years, whereas the ECB targets consumer prices of below but close to 2%.
US factory orders for long-lasting goods including autos, airplanes and electronics were flat in November, as a strong Dollar and struggling global economy weigh on US manufacturers. The Greenback has gained almost 20% against the currencies of the US main trading partners over the last 18 months. According to the Commerce Department, non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4% last month. Core capital goods orders climbed by a revised 0.6% in October. They were previously reported to have increased 1.3%. New orders in the category were down 3.6% through the first 11 months of 2015 compared with the same period a year earlier. Durable goods orders have plunged 3.7% year-to-date. Gross domestic product expanded at a 2% seasonally adjusted annual rate in the three months through September, the Commerce Department said earlier in the week, driven by a 9.9% growth rate for fixed non-residential investment in equipment. Overall growth appears fairly steady as 2015 comes to an end. Macroeconomic Advisers expected US GDP to rise at a 1.9% pace in the fourth quarter.
EUR/USD is silent, hovers around 1.0975
For a second consecutive day the most traded FX cross remains largely stuck in between the weekly pivot point and weekly R1 at 1.0975. The distance towards both technical levels amounts to 40-45 pips for the moment. It proclaims that traders are undecided now and they are unwilling to move the pair significantly in either direction. Trading volume is the lowest since May-end; however, low liquidity risks shaking the market before year-end. Nonetheless, we expect EUR/USD to remain within the 1.09-1.10 range on Tuesday.Daily chart
Trading conditions remain largely undecided in the one-hour chart. We expect the pair to trade in a tight range in the run up to a second bunch of holidays, namely the New Year. This is going to be reinforced by tumbling trading volumes across the board.
Hourly chart
Market sentiment provides no signs of changing before New Year
At the same time, even more bearish traders are entering the OANDA and SAXO Bank markets. OANDA's bearish share of all transactions went up to 61.7% by Tuesday morning, while SAXO Bank clients are now short on the Euro in almost 69% of all cases.