- Commands to buy the euro versus the dollar in 100-pip range from spot changed back to strongly negative (32% bullish / 68% bearish)
- At the moment, the closest resistance for the pair is located at 1.1332
- In case of development to the south, the closest support is currently placed at 1.0984
- Upcoming events on January 27: ECOFIN Meetings, US Durable Goods Orders (Dec), Services PMI (Jan), Consumer Confidence (Jan) and New Home Sales (Dec)
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The German economy started the year on an upbeat note, as demand increased for the first time in three months, while employment rose. According to Markit Economics, flash composite PMI reading, which measures activity in the manufacturing and services sectors accounting for more than two-thirds of the Europe's largest economy, ticked up to 52.6 in January from the final reading of 52.0 in December.
In France, however, the economy faced a sharper contraction in manufacturing and services that was coupled with companies' deteriorating pricing power. Composite PMI declined to 49.5 in January, down from 49.7 in the preceding month, remaining in the red zone for a ninth month in a row. In the services sector, the PMI came in at 49.5 in the reported period, after breaking above the 50 point that points to expansion in activity last month.
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US data to drive EUR/USD pair on Tuesday
Statistics that is going to be published on January 27 will mainly come from the Unites States. Traders are likely to pay attention to fundamentals on US core durable goods orders in December which are expected to rebound after a sharp drop a month before. This data will be followed by new home sales numbers for the same month, as well as consumer confidence and services PMI indices for January 2015. EU Finance Ministers, in turn, will hold the scheduled ECOFIN meeting in Brussels on Tuesday, where Greek elections will be in focus of discussion.Read More: Fundamental Analysis
EUR/USD's drop to continue in the long-term
The long-term outlook for the EUR/USD currency pair is remaining bearish both in short and long-term. The ECB has made a long-awaited decision to expand asset purchases back on Jan 22, which will continue pushing the Euro to the downside. Moreover, the lowest point since the year 2003 around 1.1113 has already been hit by EUR/USD cross. Taking into account present monetary conditions and bearish outlook for the Euro, the pair has a chance to go below 1.10 towards the end of the first quarter of this year. Short-term bullish actions are still possible, but their impact and size are not expected to be appropriate for the common currency to commence a stable recovery. Moreover, some market participants suggest it may fall further and even trade towards the parity in course of this year.Daily chart
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Friday was marked by a second day of considerable losses of the Euro versus US Dollar, as the pair fell even below the 1.1150 mark, thus furthermore reflecting the ECB's decision to start QE in the single currency area. At the same time, EUR/USD managed to rebound slightly towards the very end of the week and close just above the 1.12 major level. Following this negative development, technical indicators are now giving mixed signals on all time-frames, assuming the pair will make a stop around 1.12 for some time.
Hourly chart
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Long opened positions remain neutral
At the same time, commands to acquire the Euro dropped back to the red zone, as their share deteriorated to 32%, down from 51% before the weekend. It proclaims that, in case the pair increases in price, in the medium-term bearish pressure may stop the pair from climbing further around the weekly PP at 1.1332.
On the other hand, if the euro declines, total losses may potentially extend down to the weekly S2 at 1.0766 in the foreseeable future.
Spreads (avg,pip) / Trading volume / Volatility
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Dec 26 and Jan 26 expect, on average, to see the currency pair around 1.16 by the end of April. Though the majority of participants, namely 54% of them, believe the exchange rate will drop down even more below this mark in ninety days, with 36% alone seeing it below 1.12. Alongside, 25% of those surveyed reckon the price will trade in the range between 1.16 and 1.22 by the end of April of this year.
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