- Orders to buy soared from 48 to 65%
- 51% of positions are long and 49% are short
- Immediate resistance is at 1.13
- Pair is supported at 1.12
- Upcoming events: German CPI (Feb), US GDP (Q4), Chicago PMI, Pending Home Sales, UoM Consumer Sentiment, FOMC Members Dudley and Fischer Speeches
German consumer mood brightened amid increasing optimism about the economic growth and low oil prices, which freed up cash for Germans to spend. Confidence among German consumers hit the highest level since late 2001, according to the market research group GfK. Its forward-looking Consumer Sentiment Index rose from 9.3 points in February to 9.7 points in March. GfK admitted that geopolitical problems such as the Ukraine conflict and financial problems in Greece appeared to have a limited impact on German consumers. That is not a surprise given the nation's economy continue to strengthen with the unemployment rate falling to the lowest level in more than two decades in February. The Labour Office reported that the number of jobless people declined by a seasonally adjusted 20,000 to 2.812 million, the level last seen in December 1991. The jobless rate was at a record low of 6.5% for a third consecutive month in February and remains the lowest since German reunification in 1990.
Meanwhile, Spain managed to maintain its expansion rate in the fourth quarter, with the final data confirming the Euro zone's fourth biggest economy grew 0.7% on quarter in the three months through December. It was the sixth straight quarter of continuous growth in Spain. On an annual basis, Spain's GDP rose 2.0% following the 1.6% expansion in the third quarter.
Eyes on German CPI and US GDP
There is a good chance elevated volatility will be equally distributed during the day, as important events are scattered from 7:00 to 19:00 GMT. However, the main releases are the German CPI growth, which is expected to leave the negative territory and post a positive 0.6% change, and the US GDP, which is expected to expand at a slower pace than in the third quarter.EUR/USD plummets 160 pips
The long-term outlook for the EUR/USD currency pair remains bearish. On January 22, the ECB made a long-awaited decision to expand its asset purchases, which will continue pushing the Euro to the downside. Moreover, the lowest point since the year 2003 around 1.1113 has already been hit by EUR/USD cross. Taking into account present monetary conditions and bearish outlook for the Euro, the pair has a chance to go below 1.10 towards the end of the first quarter of this year. Short-term bullish actions may take place, but their impact and size are not expected to be appropriate for the common currency to commence a stable recovery in the long-run. Moreover, some market participants suggest it may fall further and even trade towards the parity in course of this year.In the meantime, Naeem Aslam, chief market analyst at Ava Trade, considers the recent comments of Janet Yellen "pretty bearish", which contributed to the volatility of EUR/USD. At the same time, the analyst expects the Chair of the Fed to change her view after the labour report next month, which in turn is going to put pressure on the Euro-Dollar. According to Naeem, the exchange rate is going to be more or less stable in the near term, staying around 1.14, but afterwards the price will decline. First, down to 1.11 during the next three months, then after three more months it should bottom out at 1.08 and commence a recovery to 1.10, as the markets will start to feel the effect of the quantitative easing introduced by the ECB.
Daily chart
The Euro depreciated faster than expected, effortlessly piercing through a supposedly tough support at 1.13. EUR/USD is now trading as low as 1.12, a level that can potentially hold the rate for a while, but is likely to be broken eventually. This will pave the way for a decline to 1.11, namely this year's minimum, which is also expected to become the victim of the bears in the end, but may well trigger a rally to 1.13/1.14 before giving in.
Hourly chart
Sentiment proves to be resilient
A drop in the value of the Euro had a more profound impact on the distribution between the long and short positions at OANDA, where the share of bulls soared from 43 to 55%. The long/short ratio at SAXO Bank changed from 41/59 to 47/53.
Spreads (avg,pip) / Trading volume / Volatility
Community members are net bearish
Stix, one of the few Dollar-bulls, notes presence of tough resistance near 1.142 and explains decreased volatility with the general bias being long. A proponent of a bearish outlook, WallStreet6, argues that "the Euro is under pressure amid the unresolved situation with Greece and the economic situation in the Euro zone".
As for the long-term views of traders polled by Dukascopy, 50% of people expect EUR/USD to be above and 50% of them expect the rate to be below the level of 1.12. The most popular answer among the votes collected between Jan 27 and Feb 27 was the 1.12-1.10 price interval (16%), followed by 1.10-1.08 and below 1.06, both with 12% of all votes.