- Commands to buy the Euro versus the US Dollar in 100-pip range from the spot are bearish (40% long / 60% short)
- The closest resistance for this pair is located at 1.1003
- At the same time, the closest support is currently placed at 1.0924
- Upcoming events on May 27: Germany Gfk Consumer Confidence (Jun), G7 Finance Ministers' Meeting
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After announcing an acceleration of money printing to boost bond buying before liquidity dries up during Europe's summer vacation period in July and August, the European Central Bank slowed its weekly pace of purchases. The central bank bought 11.819 billion euros worth of assets in the week ended May 22, marking the smallest increase in three weeks.
Under the quantitative easing programme which began in early March, the ECB aims to purchase 60 billion euros a month of bonds, asset-backed securities and covered bonds. The scheme is intended to last till September 2016, or beyond to ensure a sustained adjustment in the inflation path back towards the ECB's 2% target.
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G7 finance chiefs to meet in Germany tomorrow
During the May 27-29 period, the Group of Seven finance ministers will meet in Dresden, Germany to discuss inflation, bond market and faltering global growth. The meeting will take place just one week before the G7 leaders are going to participate in the 41st summit in Bavaria, Germany.Read More: Fundamental Analysis
EUR/USD likely to lose value, trading range to narrow down
Judging from EUR/USD's developments that took place since May of the previous year, the pair is clearly trading downwards on a long-term chart. At the same time, it seems that now the pair is being bounded between the 2014 low and long-term downtrend line, meaning that it is currently hovering inside the descending triangle pattern. Moreover, this pattern implies a narrowing trading range, while the break-out point can be reached by the end of August. In the medium-term the common European currency may surge up to the 1.1450 mark where long-term downtrend is able to push the cross back in the direction of 1.05-1.10 area. However, the pair can also assume a possibility of growing as high as 200-day SMA around five figures above the downtrend, before finally making a decision to commence a bearish correction.Daily chart
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Yesterday, EUR/USD managed to consolidate below the monthly pivot point (1.1003) and is moving further downwards on Tuesday. This event negated the potential upside pressure and market is now likely to focus on the bearish development. Initial demand is currently offered by the 55-day SMA, which is placed at 1.0924. The next support is, in turn, located around 1.0850 (weekly S1; Bollinger band), which also guards the long-term target at 1.0740 (monthly S1).
Hourly chart
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Read More: Technical Analysis
EUR/USD sentiment is bearish, bullish orders are back below 50%
Meanwhile, the commands to buy the Euro against the US Dollar in 100-pip range from the current market price dropped back below the 50% threshold, while losing 11% over the past 24 hours to reach just 40% in the morning on May 26.
It proclaims that in case the EUR/USD rises in value, the pair's potential rebound is likely to be limited by the monthly pivot point at 1.1003. On the other hand, a downward development of the Euro should be extended down to the weekly S1 at 1.0856.
Spreads (avg,pip) / Trading volume / Volatility
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Apr 26 and May 26 expect, on average, to see the currency pair around 1.12 by the end of August. Though the majority of participants, namely 48% of them, believe the exchange rate will trade below this level in ninety days, with 33% alone seeing it below 1.08. Alongside, 27% of those surveyed reckon the price will trade in the range between 1.12 and 1.18 by the end of August of this year.
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