- Share of sell orders increased from 52 to 54%
- 52% of positions are long and 48% are short
- Resistances are at 1.1050 (200-day SMA) and at 1.11 (down-trend and 200-hour SMA)
- Major up-trend implies demand circa 1.0950
- Economic events: Euro Area M3 Money Supply (Jan), Final CPI (Jan), US Unemployment Claims, (Core) Durable Goods Orders (Jan)
The Fed policy makers remain divided on future interest rate hikes. Jeffrey Lacker, Richmond Fed President, said that the US central bank still has room to lift rates further in the coming months, as there are no signs that recession is imminent. Even though inflation remains below the Fed's 2% target, inflation indicators suggest a possible move back toward the goal over the medium term, Lacker said. The official added that economic analysis indicates that inflation could average 1.9% in the period between 5 years to 10 years from now. Yet, Lacker is not a voting member this year. Moreover, the new head of Minneapolis Fed, Neel Kashkari, said that he is optimistic about the US economy, which continues to grow moderately as the year progresses, adding that he sees both upside and downside risks to the growth outlook. Meanwhile, Robert Kaplan, Dallas Fed President, said that he does not expect the US economy to enter recession this year. Kaplan is among Fed officials advocating a patient and cautious approach to policy normalization given the global headwinds.
At the same time, St. Louise Fed President, James Bullard, reiterated his opposition to further interest rate increases amid a decline in US inflation expectations, which threatens the Fed's credibility. Investors are now expecting a price measure of less than 1.5%.
Euro Area inflation to stay at 0.4%
The Euro is likely to be a little more volatile than yesterday, being that today the ECB is releasing a report on the money supply and Eurostat is scheduled to publish the CPI figure. Nevertheless, the main events will be elsewhere, and most of the pair's volatility is likely to come from the US side. While the initial jobless claims are estimated to rise by 8 thousand to 270K, the core durable goods orders are to grow 0.2% after contracting 1.2% a month earlier.
EUR/USD enclosed between 1.1050 and 1.0950
The pair stalled after it had broken through the 200-day moving average. From above the fluctuations are now limited by 1.1050, while any attempts of the bears to push the price lower are to be prevented by a dense demand area at 1.0970/50, which consists of the up-trend, monthly R1, and 100-day SMA. Eventually, however, the bulls should gather enough strength to throw the rate above 1.1050, which will pave the way for a multi-week recovery towards the October high.Daily chart
In addition to a tough resistance level at 1.1050, we also have the falling resistance trend-line and 200-hour SMA at 1.11 dollars. Wide fluctuations are thus unlikely, and volatility should be decreased until the weekend. Once one of the key levels is breached, we are likely to see strong sustainable trends and large intraday changes.
Hourly chart
SWFX market neutral; Saxo Bank clients are short
Meanwhile, traders at OANDA and Saxo Bank are net short on the Euro. Right now, 54% (56% yesterday) of clients of the Canadian broker are holding short positions. At the same time, 62% of clients (just like 24 hours ago) of the Danish broker are also holding short positions.
Spreads (avg,pip) / Trading volume / Volatility
20% of traders expect Euro to cost between 1.113 and 1.105 dollars
Participants of the Dukascopy Community Forecasts quiz support the general promising view on the pair, with 63.5% of all votes being long at the moment. The average expectation for the end of the current week is located at 1.115. However, the price range with the most significant portion of votes is 1.113/05 - a fifth of all votes fell here.
Nightrader is bullish on EUR/USD this week. According to him, the pair "is currently in a phase of retracement within a visible uptrend in the daily time frame, while the weekly time frame shows that prices are in a phase of a major drop." On a condition that "prices in the next few days break the visible bearish channel in the 4-hour chart", there "can be a movement towards 1.120, confirming the uptrend in the short term," he added.
In the meantime, another Dukascopy Community member, saso, reckons that it is better to be bearish on EUR/USD, but admits that his outlook "depends on sentiment that could impact FX trading." In case the week commences "on a positive note, then EUR/USD should fall," and if the week starts on a negative note, then the pair should rise.