- SWFX sentiment is bearish in 56% of all cases, the lowest share of short traders in five days
- Bullish commands in 50-pip range from the spot soared above 60%, meaning clients expect more gains
- As long as EUR/USD is above 1.1220, short-term outlook will imply second testing of resistance at 1.1320
- Aggregate daily technical studies are bullish and only RSI indicator assumes EUR/USD is overbought
- Economic events to watch over the next 24 hours: Swiss Trade Balance (Feb); French, German and Euro zone Flash Manufacturing/Services PMI (Mar); German IFO Business Climate (Mar) and ZEW Economic Sentiment (mar); US HPI (Jan); FOMC Members Evans and Harker Speak
The Euro zone's current account surplus shrank in January from the preceding month, according to the European Central Bank. The Euro bloc's current account logged an unexpected decline in its surplus to 25.4 billion euros on a seasonally adjusted basis in January, compared with a revised 28.6 billion euros in the prior month. In the 12 months to January, the accumulated current account surplus accounted for 3% of the currency bloc's gross domestic product, up from 2.5% in the 12 months to January 2015. A separate report showed the Euro zone's consumer confidence deteriorated for the third month in a row in March, amid concerns about weaker growth prospects for the world's economy which have forced the European Central Bank to launch fresh stimulus measures. According to the European Commission, the measure of consumer sentiment across the 19 countries that use the Euro dropped to –9.7 from -8.8 in February, hitting the lowest level since December 2014. The gauge remained above its long-term average of minus 12.8. The decrease of confidence is in line with surveys of business activity, which have pointed to a decline in growth in the early months of 2016. The ECB's economists cut their growth forecast for this year to 1.4% from 1.7% in December.
The Reserve Bank of Australia Governor Glenn Stevens welcomed signs of house price growth cooling in Melbourne and Sydney thanks to timely regulatory measures on lending standards. Mr Stevens said that it was too soon to judge whether the turbulence that roiled financial markets early this year has come to an end, but he underlined Australia's resilience against any potential shock. The local financial system has been strengthening despite a sudden slowdown in China and uncertainty over the effect of European and Japanese monetary policy. In the meantime, a report from the Australian Bureau of Statistics showed that house-price inflation in Australia continued to wane last quarter, with prices climbing at the slowest pace since the September quarter 2012. Australia's House Price Index increased 0.2% in the final quarter of 2015 after the 2.0% rise in the preceding three-month period. On an annualized basis, house prices surged 8.7% in the three months through December, with Sydney recording the largest annual price advance of 13.9%, followed by Melbourne where prices soared 9.6%. The steep slowdown in house price growth adds to other recent signs that the property market is slowing down after years of rapid activity.
Upcoming fundamentals: German business confidence and economic forecasts to grow
As the panic caused by expectations that the Chinese economy is abruptly slowing down waned, forecasts among Germany's businesses, institutional investors and analysts are highly likely to improve in March. At 9:00 GMT the IFO business climate index is out, as economists foresee a pick up to 106 points this month, up from 105.7 in the preceding month. This is a rare case when ZEW economic sentiment is published throughout the same day as the IFO indicator. It will come out at 10:00 GMT with an expected advance to 5.4 points in March from only 1.0 point in February. Today's markets are also likely to be shaken by Markit's data on activity in European production and services industries. French data is due at 8:00 GMT, followed by Germany's at 8:30 GMT and pan-Euro zone numbers at 9:00 GMT. This is going to be the flash reading for March and experts are looking for a moderate improvement for manufacturing industry and no change for services sector.
EUR/USD holds above support at 1.1225
Fluctuations of the most traded FX currency pair were quite limited on Monday, mainly owing to emptiness of the economic calendar. Daily range stood within 20 pips, meaning EUR/USD is maintaining 1.1227/23 as the immediate support. We are thereby not ruling out a spike to 1.1310 where the pair is going to meet the multi-month downtrend. Failure there would be the second one in four days and would diminish our future outlook. Adding to that, the daily RSI indicator supposes the cross is overbought, even though such a view is disagreed by many other daily indicators.Daily chart
In case EUR/USD continues to develop in the present mild bearish trend, then a testing of the 200-hour SMA (1.1172) is going to become inevitable over the next 48 hours. From there, however, we can foresee a rebound. They key bullish aim is the 1.14-1.15 area with several vital resistances, but the bears are hoping to get the pair down to 1.0850 (two January-March uptrends) in the foreseeable future.
Hourly chart
SWFX market sentiment shifts in favour of long traders
About 60% (63% yesterday) of all OANDA positions on the EUR/USD cross are betting the common European currency is going to retreat versus the Buck. As for SAXO Bank, here the shorts' advantage is even wider at 66.85% against the 33.15% share for the bullish side.