- More than 60% of SWFX traders are short on EUR vs USD
- Most of pending commands believe the Euro will diminish in value
- Current narrow trading to be bounded by 1.1457 (weekly R1) and 1.1329 (weekly S1)
- Both daily and weekly technical indicators foresee EUR/USD's rally
- Economic events to watch over the next 24 hours: Italian Industrial Production (Feb); FOMC Members Dudley and Kaplan Speak; Fed Announcement
British industrial production unexpectedly dropped in February, suggesting that the sector may drag on growth for a second straight quarter. According to the Office for National Statistics, industrial output declined 0.3% in February from January, when it climbed 0.2%. Output was predicted to climb 0.1%. Based on the current data, output would need to soar 3.1% in March just to come in flat for the three months through March. Manufacturing production also fell in February, dropping 1.1%. It was down 1.8% from a year earlier. The biggest drag came from the manufacture of transport equipment, which declined 2.9%. Weak trade and manufacturing numbers in recent years have raised concerns about the U.K.'s imbalanced economy. Britain's economy lost steam in the first three months of the year. The National Institute of Economic and Social Research said its estimates of GDP suggested that the UK's economic output increased by 0.3% in the first three months of the year, the weakest rate of growth for the UK economy since the final quarter of 2012. Meanwhile, the EEF, an association of British manufacturing employers, lowered its 2016 UK GDP forecast to 1.9% from 2.1% and scaled back its manufacturing growth expectations to 0.6% from 0.8% for the year.
Machinery orders plunged in Japan in February, offsetting most of January's unprecedented gains, in further signs the world's third biggest economy may need more stimulus. Japan's machinery orders excluding ships and utility items, tumbled a seasonally-adjusted 9.2% month-on-month in February, according to the Cabinet Office, after surging 15% in January. Analysts, however, expected a 11.9% decline in machinery orders in February. Compared with a year earlier, core orders dropped 0.7% in February, less than a median estimate for a 2.7% decline. In the December quarter the economy contracted 0.3%, led by a slump in consumer spending, while growth indicators so far for the March quarter suggest the economy may have slipped back into recession. Moreover, the Japanese Yen has gained more than 10% versus the US Dollar this year, thereby lowering exporters' earnings. Economists expect the Bank of Japan to soon take action against the surging Yen, particularly as inflation is already non-existent, either by expanding the central bank's Qualitative and Quantitative Easing programme or by slashing interest rates again. The BoJ shocked markets in January by deciding to add negative interest rates to its massive asset-buying programme, but the move has failed to underpin stock prices or arrest an unwelcome surge in the currency.
Upcoming fundamentals: Italian manufacturing output to correct lower
The only major European data release on Monday is scheduled for 8:00 GMT. At this point of time the Italian industrial output statistics is coming out, while analysts suppose the number published will reveal a 0.5% drop on a monthly basis in February. However, this is going to follow a confident 1.9% increase in the preceding month. However, much more attention of EUR/USD's traders will be likely paid to speeches given by FOMC members William Dudley and Robert Kaplan at 13:25 GMT and 17:00 GMT, respectively.
EUR/USD faces tighter trading ranges
EUR/USD was consolidating in a very narrow range last week, which makes the technical setup neutral for the upcoming working week. Weekly pivot points are placed much closer to each other, meaning now the major 1.15 resistance (October 2015 high) is safeguarded by the weekly R1 at 1.1457. The weekly S1 is in turn located at 1.1329, followed by the 20-day SMA at about 1.1294. A break-out from any of these zones should raise volatility. Meanwhile, both daily and weekly aggregate technical studies suspect the break-out will happen in the upward direction.Daily chart
There is a wide support coming from the 200-hour SMA, which is guiding the hourly trading of the EUR/USD cross. Within the present bullish channel we keep looking at the 1.1460 mark as the primary supply, as there the longs should meet the September 2015 peak and the pattern's upper edge. Growth scenario therefore seems more probable, because any failures under the SMA (1.1373) will be contained by the lower bound of the pattern.
Hourly chart
SWFX sentiment is waiting for more market moves
Only about a third of all OANDA clients are holding long positions on the EUR/USD cross, which is the worst sentiment among the majors there. Bullish conditions are even more depressing with SAXO Bank, because more than 71% of their market participants are still looking for a selloff.