EUR/USD ready to test up-trend at 1.0940

Note: This section contains information in English only.
Source: Dukascopy Bank SA
  • 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

© Dukascopy Bank SA
The US Dollar experienced an inflow of funds on Friday on the back of very optimistic fundamentals across the board. The world's largest economy added 1% in the last three months of 2015, according to the preliminary (second) estimate. This came against economists' forecasts who assumed a growth of only 0.4%. Moreover, personal consumption expenditures, personal spending and income all gained more than expected. Additionally, US consumers seem to be feeling quite well in spite global turmoil. This development resulted in a plunge of the Euro against the Buck by 0.76%. Meanwhile, commodity markets lost steam on Friday and were unable to confirm this year's highs. High pressure was immediately reflected in the performance of commodity-dependent currencies, as both EUR/AUD and EUR/NZD added about 0.70% in one trading day.

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.

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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
© Dukascopy Bank SA

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
© Dukascopy Bank SA

Difference between long and short traders is unchanged

Over the weekend we have seen little movement in terms of either open positions or pending orders for the EUR/USD currency pair. Bullish SWFX traders are holding a minimal two pp advantage over the bears for a second day in a row. General sentiment is positive for a fourth consecutive day, the longest streak of the bulls being above 50% in almost 14 weeks. Adding to that, about 55-58% of all pending commands are set to sell the Euro versus the Greenback.

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.













Spreads (avg,pip) / Trading volume / Volatility



Average forecast says EUR/USD will trade at 1.12 by May

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Jan 15 and Feb 15 expect, on average, to see the currency pair around 1.12 by the end of May. Though the majority of participants, namely 58% of them, believe the exchange rate will be generally below 1.14 in ninety days, with 41% alone seeing it below 1.10. Alongside, 30% of those surveyed reckon the price will trade in the range between 1.14 and 1.20 on May 31.

© Dukascopy Bank SA

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