- 51% of all open positions are still long, no change over the weekend
- Pending orders remain moderately on the bearish side for a fifth consecutive day
- A slide below two-month trend-line will point on further losses down to 1.0841 (monthly PP)
- Indicators are mixed, as daily ones are bearish and weekly studies want to see a rally
- Economic events to watch over the next 24 hours: Swiss KOF Leading Indicator (Feb); Swedish GDP (Q4); Euro zone Flash CPI (Feb); Italian CPI (Feb); US Chicago PMI (Feb) and Pending Home Sales (Jan); FOMC Member Dudley Speaks
German inflation cooled further in February, reinforcing the view the European Central Bank will deploy additional stimulus measures as soon as next month. Inflation in the Euro zone's powerhouse, was breakeven on an annual basis, sharply falling from the 0.5% growth in January, according to the Federal Statistics Office. In monthly terms, however, the reading recovered and added 0.4% in February, compared with the 0.8% decline in the preceding month. The so-called Harmonized Index of Consumer Prices, showed inflation dropping 0.2% year-on-year, sharply down from January's 0.4% rise. Measured on a monthly basis, prices increased 0.4% in February, following the 1.0% decrease seen previously. Meanwhile, the French economy surprisingly maintained a solid pace of growth in the final quarter of 2015. GDP in the Euro zone's second biggest economy expanded 0.3% in the last three months of 2015 after growing at the same pace in the third quarter, statistical office INSEE reported. Exports rebounded and climbed 1.0% after falling 0.6% previously and imports accelerated to a 2.5% expansion after surging 1.7% in the third quarter. Overall, foreign trade balance contributed negatively again to GDP growth: -0.5 points following -0.7 points. Conversely, changes in inventories contributed positively by 0.7 points, the same as in the previous quarter.
New Zealand business confidence declined in February amid falling export prices and turbulence in equity markets. The ANZ Bank survey showed that a net 7.1% of respondents were optimistic about the economy over the year ahead, compared with 23% in the January survey. A net 25.5% of companies saw their own activity increasing, down from 34.4% in the prior month, and a net 12% expected their profits growing, compared to a net 17.7% in January. Business confidence declined in all industries except manufacturing, with attitudes the most downbeat in agriculture. Moreover, interest rates are predicted to decline by a net 37.3% of respondents, from net 32.8% in January. Inflation expectations for the coming year slipped to 1.39%, from 1.64%. A net 6.9% of firms see the unemployment rate rising, compared to a net 19% in January, and net 21.9% see capacity utilisation increasing, compared to 17.7% a month earlier. A separate report showed New Zealand building consents dropped at the quickest pace since August last month. However, building activity is expected to continue to be supported by record-low interest rates and strong housing demand. Building consents plunged a seasonally-adjusted 8.2% month-on-month in January, according to Statistics New Zealand, following an increase of 2.3% in December.
Upcoming fundamentals: All eyes on Euro zone inflation at 12:00 GMT
Monday of this week is expected to be a busy day in both Europe and the US. However, traders are most closely watching inflation data from the Euro zone that is out at 12:00 GMT. Analysts see the headline reading falling back to zero in February, after it posted a 0.3% growth (revised down from 0.4%) in the first month of 2016. Core CPI is also projected to decrease below 1% to 0.9% this month. In the meantime, US pending home sales are estimated to surge by 0.6% in January, following a negligible 0.1% rise in the preceding month. Chicago PMI, however, is highly likely to show a slump from 55.6 points to 52.1 points in February, according to the average analysts' prediction.
EUR/USD ready to test up-trend at 1.0930
EUR/USD neared the 2016 uptrend line at 1.0925 on Friday and managed to stay afloat above this key support. We are closely watching all developments around this demand, while any failure is highly likely to result in a drop down to the monthly pivot point at 1.0841, which is reinforced by the first weekly support 11 pips from the North. On the side of the bears, daily technical studies are mostly pointing to the downside this Monday morning. In the meantime, a spike past 55-day SMA (1.0969) should re-expose 200/20-day SMAs at 1.1045.Daily chart
Based on the one-hour chart for the EUR/USD cross, our expectations seem to be worsening at the moment. The pair continues to hover inside the broadening falling wedge pattern, though near the lower boundary of it. However, by violating 1.0954 the Euro confirmed the lower edge of the channel up pattern that has had its starting point earlier in December 2015.
Hourly chart
Difference between long and short traders is unchanged
There is a marginal positive difference of 0.60% between OANDA market participants who want to buy the Euro and those who prefer to acquire the American currency. However, SAXO Bank market remains biased in favour of the bears, as they are holding 58.60% of all open transactions at the moment of writing.