- 58% of all SWFX positions are bearish
- Wide-range pending orders are bearish in two thirds of all cases
- Continuous gains indicate the bullish sentiment is confident; October high at 1.1495 is now exposed to upside risks
- Fresh weekly technical indicators turned mixed, as pair is perhaps becoming moderately overbought
- Economic events to watch over the next 24 hours: Swiss Retail Sales (Feb) and Manufacturing PMI (Mar); Euro zone Manufacturing PMI (Mar) and Unemployment Rate (Feb); US Non-Farm Payrolls (Mar), Unemployment Rate (Mar), Average Hourly Earnings (Mar), ISM Manufacturing PMI (Mar) and University of Michigan Final Consumer Confidence (Mar); FOMC Member Mester Speaks
Although inflation in the Euro zone rose in March, it remained in negative territory, underscoring the continued struggle faced by the ECB to boost inflation in the currency bloc closer to its medium-term target of just below 2%. Eurostat's flash estimate showed annual inflation in the Euro zone was minus 0.1% in March after negative 0.2% in February. Core inflation, a figure closely watched to assess underlying trends, climbed to 0.9% from 0.8%. The inflation increase is the latest in a string of slightly positive data for the 19-nation currency bloc, suggesting that the Euro zone's tepid domestic recovery remains on track despite headwinds from abroad. The ECB has been battling ultra-low inflation for years and unveiled an unexpectedly massive stimulus package this month, lowering rates deeper into negative territory, expanding monthly asset purchases by a third and offering free loans to banks. The ECB expects inflation to average just 0.1% this year before a pickup in 2017. Meanwhile, the unemployment rate in Germany remained at a record-low level of 6.2% in March, with unemployed persons staying at 2.73 million. Moreover, German retail sales advanced 5.4% on an annual basis in February, a huge jump from the 1.2% decrease booked a month before. However, sales declined 0.4% month-on-month, following the 0.7% gain before.
The UK economy ended 2015 on a firmer footing than previously thought, but the current account deficit widened to a record high level in the final quarter of the year. Britain's gross domestic product increased 0.6% in the three months through December, compared with the 0.5% gain reported last month, according to the Office for National Statistics. The revision came due to better performance of the services sector, which rose at a faster pace of 0.8%, industrial output and construction. On the expenditure side, the strongest upward driver again came from consumers, with household expenditure increasing 0.6% to 267.4 billion pounds during the reported period, helping to offset a 2% decline in business investment and weak exports. The UK economy grew 0.4% in the third quarter. The annual growth in the fourth quarter was also revised, by two percentage points up to 2.1%. While the British economy grew stronger at the end of last year, the current account deficit widened to 32.7 billion pounds during the fourth quarter, the largest ever deficit recorded by the ONS, and compared with a revised deficit of 20.1 billion pounds recorded in the previous quarter. The deficit accounts for 7% of total GDP, which the ONS said was also the largest proportion since records began in 1955.
Upcoming fundamentals: Jobs Day USA
On a first Friday of a month the US Labour Department is releasing the country's employment and wage numbers for the previous monthly period. Average forecasts say the world's most powerful economy has generated 206,000 jobs in March, down from 242,000 jobs we had observed earlier in February. Despite that, analysts assume this is a very decent projection figure, given that the US is inching closer to full employment condition. The jobless rate has probably been flat at 4.9%. Meanwhile, another close look will be at wages. Salary gains are an issue, because the market believes that tightening labour market should eventually lead to increased wage pressures, but it is not really happening. Last period they dropped by 0.1% on a monthly basis, while in March they are set to grow by 0.2%. This is going to be the only employment report between the Fed's March and April meetings.
EUR/USD hits 6-month peak amid rally
By appreciating for a fourth successive day on Thursday, EUR/USD tested the 1.14 mark for the first time since October. By session-end, however, gains were contained by the last weekly resistance at 1.1390. Friday is going to be very data-dependent. We would allow for a correction down to 1.1337 (weekly R2), in case US labour market data surprises to the upside. This view is still disagreed by the daily technical indicators, as they are indicating to the upside. A spike beyond the 1.14 level risks exposing the October 2015 peak at 1.1495.Daily chart
We are bullish on the Euro versus the Dollar, based on the one-hour chart. Nevertheless, a correction after four days of positive changes cannot be ruled out completely. On the last trading day of this week a drop under the 200-hour SMA at 1.1233 looks highly unlikely. The bulls continue focusing on the September/October highs of the previous year.
Hourly chart
Sentiment flat, while 100-pip commands tumble noticeably
Already more than seven out of ten SAXO Bank clients are ready to sell the Euro against the Dollar. Alongside, advantage of OANDA's short participants widened further over the past 24 hours. Now there are as many as 65.62% of bearish transactions, while the bulls are holding only 34.38% of all trades.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members continue predicting losses for EUR/USD
Community members believe the pair will be able to slip to 1.10 by this Friday, just slightly below the weekly S2. The number of bulls and bears is almost equal, hence, the outlook is unclear, but still, the bearish votes weight. Technical indicators, in turn, do not give a clear ‘buy' or ‘sell' signal. According to Jignesh's views, "after a quiet week, the EUR/USD is setting up for a volatile week ahead. Early in the week we have Yellen speaking and the USD can be heavy ahead and possibly during. Though bearish pressure may kick in mid week, the pair is largely supported to the downside as the pair remains in a broader bullish cycle. The directional move may occur late in the week on the back of NFP."
A bearish opinion is provided by Besim. He generally suggests that "The EUR/USD dipped 16 points on the holiday to trade at 1.1160 with no major data announcements, except for US GDP. American data have steadily improved over the last few weeks, with Bloomberg's gauge of economic surprises climbing to the most positive level in more than a year."