- There is a negative gap of ten percentage points between bulls and bears in SWFX market
- Somewhat more than 50% of all pending orders are now set to sell the Euro in both ranges from the spot
- Support cluster around 1.11 seems to be quite tough to be penetrated in the foreseeable future
- Next week's projections from the side of technical indicators are largely mixed
- Economic events to watch over the next 24 hours: Swedish Unemployment Rate (Jan); EU Summit; ECB President Draghi Speaks; ECB Vice-President Constancio Speaks; US CPI (Jan); FOMC Member Mester Speaks
Growth and inflation risks are mounting in the Euro zone, the minutes of the European Central Bank's January meeting showed, and some policy makers are arguing for the need to act pre-emptively in the face of new threats. Low inflation could become entrenched, with poor wage growth already suggesting that weak crude prices are feeding into other prices, while China's downturn was also dimming the outlook as the risk of a hard landing for its economy rose, the ECB said. Meanwhile, the Euro zone current account surplus shrunk in December when compared to the previous month on a seasonally adjusted basis, according to the ECB. The current account surplus declined to 25.5 billion euros during the final month of 2015, from an upwardly revised 26.9 billion euros reported in November. A separate report showed, annual consumer prices in France remained unchanged in January. The cost of living in France climbed 0.2% in January, compared with the same period a year ago. Measured on a monthly basis, the consumer price index plunged 1.0% in the reported month. The so-called Harmonized Index of Consumer Prices showed annual inflation climbed at a pace of 0.3% year-on-year, compared with the previous month's 0.3% increase. On a monthly basis, the HICP slid 1.1% in January, compared with the 0.2% growth seen in the previous month.
Australia's labour market softened in the beginning of the year, since the unemployment rate unexpectedly jumped in January as full-time employment declined the most since 2013. The jobless rate rose to 6.0% last month, up from 5.8% in December, according the Australian Bureau of Statistics, after employment plunged by a net 7,900 in January. Economists, however, had expected job growth of around 13,000 in the reported month and the unemployment rate to remain unchanged at 5.8%. The ABS added that the number of full-time employed dropped 40,600, offsetting a 32,700 increase in part-time employment. Australia, the most China-dependent economy in the developed world, is struggling with fallout from plummeting prices for its key commodity exports and waning resource investment. Strong job growth was one the reasons why the Reserve Bank of Australia has decided to maintain interest rates on hold since May. A year ago most economists were predicting the jobless rate to increase towards 7.0% as the mining investment downturn intensified. Currently market participants are pricing in a 50% chance the RBA will slash interest rates in May.
Upcoming fundamentals: Draghi speaks in Brussels, US inflation is due
Friday is going to be a busy day in both Europe and the US. First of all, this is a second day for the EU Summit is Brussels where politicians from all 28 EU countries are deciding whether to accept the deal with the UK. At 11:00 GMT the ECB chief Mario Draghi will speak in Brussels when participating in European Council meeting. Meanwhile, Vice-President of the ECB Vitor Constancio will talk at the European-American Chamber of Commerce in New York at 13:30 GMT. Meanwhile, inflation data from the world's largest economy is out at the same time the ECB Vice-President speaks. Annual CPI is expected to surge significantly in January, up to 1.3% from 0.7% in the preceding month. Core indicator on a yearly basis has most likely remained flat at 2.1%.
EUR/USD remains in vicinity of 1.11
Downside risks for the Euro are on the table, considering that EUR/USD has tumbled for a fifth day in a row on Thursday. The bears are still unable to penetrate the 1.11 support area, with gains contained mainly by the weekly S1 and 20-day SMA. From here we foresee a rebound on Friday, even though the first formidable resistance at 1.1238/46 (weekly PP; monthly R3) seems to be out of reach over the next 24 hours. Alongside, a drop below 1.1098 will put at risk the 200-day SMA (1.1049) and success here will expose the three-month uptrend at 1.0923.Daily chart
In the 1H chart EUR/USD has shortly tested the September low of the previous year on February 18, even though now it is now hovering above this demand. To neutralize our current bearish outlook with respect to the pair, it is required to come back above the 200-hour SMA at 1.1209. The base case considers a slump below 1.1086.
Hourly chart
Orders are back to red, while sentiment stays flat
At the same time, bearish traders are clearly showing they continue to dominate in both OANDA and SAXO Bank markets, even despite some local minor setbacks in terms of their market shares. The short side with OANDA increased above 57% by the morning of February 19. Additionally, more than 63% of all SAXO Bank clients expect the Euro to retreat against the Dollar.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members are bullish on the Euro in more than 64% of all cases
Even though around three our of four Dukascopy Community members had expected the Euro to grow at the expense of the Dollar last week, during a new five-day period the bets on Euro's climb fell down to 64%. Nonetheless, it seems to remain as a clear bullish signal from the traders. The average weekly estimate for Friday, February 19, is 1.13. However, the range of expectations is largely broad and more than a half of all projections is placed with the wide range of 1.11-1.14.
As for some specific forecasts among traders, westline suggests that "EUR/USD has been trading on a bullish trend line for the past two weeks and the H4 chart is showing possible further uptrend." However, Likerty is bearish on the researched cross. He says that "EUR/USD with all the majors are in a corrective mode (USD Strength), which has a chance to fade all the gains made during the previous two weeks."