- Bulls account for 53% of SWFX market, up from 52% seen on Friday
- Future sentiment may deteriorate as bulls are keeping only 32% of 100-pip pending orders
- Fed may raise a discount rate on Monday; EU PMIs will add to market turbulence
- Daily technical indicators are mixed on Monday morning
- Economic events to watch in the next 24 hours: French, German and Euro zone Manufacturing and Services PMI (Nov); US Manufacturing PMI (Nov) and Existing Home Sales (Oct); Fed Announcement
The European Central Bank is prepared to act promptly to underpin stubbornly low inflation in the Euro zone, providing investors with the strongest hint yet that the central bank will initiate a new round of fresh stimulus measures at its December meeting. ECB President Mario Draghi mentioned changes to the central bank's asset purchase programme and deposit rate as possible tools to prevent further declines in inflation below its goal of just under 2%. Draghi highlighted that the Euro zone's recovery strength was modest and the global outlook for demand, particularly in emerging countries, had deteriorated dramatically recently. Moreover, ECB President admitted that the risk increased that the ECB would miss the inflation target. The Euro dropped to 1.0683 versus the Greenback following Draghi's speech, after trading near 1.071.
Meanwhile, Jens Weidmann, the head of the German Bundesbank and the ECB Governing Council member, disagreed that the central bank should add more stimulus. Weidmann argued that the current measures still need some time to start working, adding that low oil prices act as stimulus. Moreover, Weidmann noted that core inflation would gradually rise towards the goal and that sharp decline in energy prices is the main reason behind low price growth.
Upcoming fundamentals: A day of PMIs in Europe
This Monday is going to be unusually busy in Europe. We expect to get French and German data on November activity in manufacturing and services sectors. France is up first at 8:00 GMT, followed by Germany and the Euro zone at 8:30 GMT and 9:00 GMT, respectively. None of these indicators are estimated to fall below 50 points, meaning activity is set to continue growing. Meanwhile, the Euro group is expected to approve the next tranche of the bailout programme for Greece with the total amount of about 2 billion euros to cover budget shortfall and 10 billion euros to recapitalize the country's banks. On late Thursday the Greek Parliament passed the package of reforms needed to secure approval of the disbursement.
EUR/USD to see rising volatility this week
EUR/USD bounced back from 1.0730 on Friday and posted an 80-pip loss during the trading session. Monday is important day in terms of EU and US fundamentals. A possible Fed announcement to raise a deposit rate may easily push EUR/USD below 1.06. We are looking at Apr low at 1.0519 as the next reliable support for this currency pair. This level is guarded by monthly/weekly S2 and lower Bollinger band, which are highly unlikely to give up quickly.Daily chart
After EUR/USD returned below 200-hour SMA on Friday, confidence among the bulls worsened considerably. Even though the bearish scenario seems to prevail over the bullish one, the pair will shortly meet a support in face of a trend-line at 1.0580, which connects the Nov 6 and Nov 18 lows.
Hourly chart
Bullish advantage over bears is stable at 53-47%
Meantime, OANDA market participants raised their bullish expectations on the Euro to 54.21% by the Nov 23 morning. At the same time, around 52% of SAXO Bank traders are set to go EUR/USD short at the moment. Nonetheless, neither bulls nor bears see their advantage as confident and stable in all SWFX, SAXO Bank and OANDA markets.