- SWFX traders turned away from the Euro, sending the share of long positions down to 42%
- Notwithstanding open positions, pending orders surged over Tuesday and keep betting on a rally
- Estimates for the Fed are mixed; aggressive tone may push EUR/USD below nearest supports placed between 1.1062 and 1.0991
- Five out of eight daily technicals are giving neutral signals for Wednesday
- Economic events to watch over the next 24 hours: US CPI (Feb), Housing Starts/Building Permits (Feb) and Industrial Production (Feb); FOMC Rate Decision, Economic Projections and Press Conference
Employment in the Euro zone increased in the final quarter of 2015 as the currency bloc's gradual recovery continued. Employment across the region climbed 0.3% quarter-on-quarter in the three months ending December, according to Eurostat. Measured on an annual basis, the gauge rose 1.2% during the reported period. There are 151.9 million people employed in the Euro bloc, but some 10.3% of Europeans remain out of work, the lowest level in more than four years. Yet, the Euro zone's unemployment remained well above the 7.5% rate seen before the global financial crisis. Meanwhile, in France, the Euro zone's second biggest economy, inflation turned negative for the first time in nearly a year in February, according to INSEE. Consumer prices declined 0.2%, following the 0.2% gain in January, recording the first fall in prices since March 2015, when the CPI dropped 0.1%, and was also the biggest after a 0.3% decrease in February last year. Measured on a monthly basis, consumer prices rose 0.3% last month following the 1.0% decline in January. Year-on-year, EU harmonized prices slid 0.1% as estimated after climbing 0.3% each in the previous two months. Compared to January, the harmonized index of consumer prices gained 0.3%, in line with expectations.
New Zealand's current account deficit narrowed last quarter, as spending by international visitors reached a record high in 2015. The current account gap contracted from $4.74 billion in the third quarter to $2.61 billion in the three months ended December, according to Statistics New Zealand. The annual current account deficit was $7.7 billion, or 3.1% of gross domestic product, down from $8.1 billion in the 12 months through September. Spending by tourists jumped by $2.6 billion to $12.8 billion in 2015. The surge in inbound tourism helped offset the impact of a larger deficit on goods of $2.3 billion, which rose from $1.9 billion in the 12 months ended September 30. That was partly led by a decline in dairy exports, which offset a gain in imports such as consumer goods. Prices of dairy products declined for the fifth time in six auctions this year on the overnight GlobalDairyTrade platform, as the European Union signalled it will boost production even despite global oversupply. The GDT index is now 30% lower than a year ago and 55% off its early 2014 peak. Earlier in March Fonterra downgraded its milk price forecast from $4.15 per kg of milk solids to $3.90. In a bid to help the dairy sector and generate inflationary pressures the Reserve Bank of New Zealand cut interest rates to a record low 2.25% last week.
Upcoming fundamentals: Continuous focus on US session and Fed
The first data release today, which is going to concern traders of the EUR/USD currency pair, will be an American one at 12:30 GMT. That time markets are awaiting inflation and construction numbers from the world's largest economy for February. Annual increase in consumer prices is expected to slow down substantially to 1.0% from 1.4% in January. This is solely due to an earlier drop in oil prices in the first two months of 2016, because the core CPI is projected to remain almost unchanged at 2.1%, down from 2.2% in the previous month. Housing starts are expected to add 4.5% after a decrease of 3.8% a month before, while building permits have probably been down by 0.1% month-on-month. At 13:15 GMT the industrial production data is due. In January this indicator picked up by 0.9% and this time economists foresee a slight bounce back of 0.2%. Meanwhile, the Fed interest rate decision is out at 18:00 GMT, followed by Janet Yellen's press conference 30 minutes later.
EUR/USD stable after US macros, before Fed
Even though the most traded FX cross was little changed on Tuesday, trading volume surged to one of the highest levels in about 30 days. EUR/USD is awaiting the scheduled FOMC rate decision later today, while being supported by the cluster at 1.1062/21. This zone is exposed to bearish risks today, in case Janet Yellen releases a more hawkish statement than expected. Although, there is another support in face of the 55-day SMA at 1.0991, and only consolidation under here will neutralise our mid-term positive outlook. Meanwhile, the bulls keep aiming at the monthly R1/upper Bollinger band near 1.1230.Daily chart
The pair continues to descent lower from its five-week peak reached on March 10. The 200-hour SMA remains untouched for the time being, but its spread from the spot is tightening rapidly. In case this moving average fails to contain a selloff, then we are going to refocus down to the 1.0840 area (two trend-lines that are connecting recent lows).
Hourly chart
Pending orders bet the Euro is going to rally on Fed's day
Both OANDA and SAXO Bank market perceptions changed by less than one percent yesterday. By Wednesday morning the share of bulls with OANDA rose to 42.84%, up from 42.42% some 24 hours ago. Traditionally, SAXO Bank traders have a much more bearish opinion on the matter, as their bullish traders remain in a deep minority of only 34.48%.
Spreads (avg,pip) / Trading volume / Volatility
There is only a marginal bias in favour of the Euro vs Dollar this week
Despite the fact the EUR/USD currency pair has been trading in a strong uptrend on Friday, this week's traders' opinions divided almost equally (54.5% bullish vs 45.5% bearish). Dukascopy Community members see the pair closing at 1.09 this Friday, on March 18. This level is slightly below the weekly pivot point, suggesting a close behind this level will indicate further correction or even a beginning of a new trend to the downside.
On the positive side of traders' opinions, STARLINE has said that "the ECB has done a lot to encourage inflation in the Euro zone during the March meeting. Therefore, I am expecting only one existing option for the Euro– the bull direction." Such a view is disagreed by megajorko who claims that according to the 1H chart for EUR/USD "the bullish momentum has ended, but it is hard to say that selling can start." The trader added that "there is a formation of a double top, but there must be something additional to help the bears to take control. Forecast for EUR/USD is somewhat neutral and rangy."