- Share of long traders surged to 46% from 42% over the weekend
- Majority among negative pending orders is marginal (6-12%) over bullish commands
- ECB chief Draghi to testify in EU Parliament on Monday; US markets closed
- Daily technical studies are overwhelmingly positive for the period of next 24 hours
- Economic events to watch over the next 24 hours: US Bank Holiday; ECB President Draghi Speaks
A December decline in Euro zone industrial production dragged economic growth in the currency bloc down, adding to arguments for further monetary easing. According to Eurostat, gross domestic product in the 19 countries sharing the Euro climbed 0.3% quarter-on-quarter in the last three months of last year, unchanged from the July-September period and in line economists' expectations. Measured on an annual basis, the Euro zone economy grew 1.5%. In the first two quarters of 2015, the quarterly growth rates were 0.5% and 0.4% respectively. In December the European Central Bank slightly revised its GDP growth forecasts to 1.5% in 2015, up 0.1% from September's forecast. The central bank predicted the Euro zone's economy to expand by 1.7% in 2016, unchanged from the previous outlook, while in 2017 growth is expected to book 1.9%, up from 1.8% seen previously. Meanwhile, the Euro zone's largest economy accelerated its growth pace at the end of 2015, as strong domestic economic conditions largely offset the deteriorating economic environment overseas. Fourth quarter German GDP rose 0.3% compared to the previous quarter. For the whole of 2015 German GDP rose 1.7%. Also, the cost of living in Germany rose 0.5% in January compared to the same period a year ago
Japan's economy shrank in the final quarter of 2015 despite of more than three years of Abenomics programme aimed at rejuvenating the world's third biggest economy. Japan's economy contracted an annualized 1.4% in the three months through December as consumers refrained from spending, while exports to emerging markets failed to gather enough momentum to make up for weak domestic demand. The decline in gross domestic product appeared to be bigger than economists' median forecast for a 1.2% drop and followed a revised 1.3% rise in the preceding quarter, according to Cabinet Office. Private consumption, which accounts for 60% of GDP, declined 0.8%, a sign Abe's stimulus programme have so far failed to encourage households to spend. While domestic demand subtracted 0.5 percentage point from GDP growth, external demand, or net exports, added 0.1 point amid a decline in the value of imports triggered by plunging oil prices. Last month the Bank of Japan stunned markets by introducing a negative benchmark interest rate, in an attempt to stimulate the economy as volatile financial markets threatened its efforts to overcome deflation. Analysts expect the central bank to take additional easing at its next meeting in March, as the downside risks to the BoJ's outlook for growth and inflation are increasing.
Upcoming fundamentals: Draghi to speak before European MPs on Feb 15
The beginning of a new working week features a speech by the European Central Bank's President Mario Draghi. He is going to talk to the European Parliament's Economic and Monetary Affairs Committee. A testimony will be closely monitored by the market, also provided that US trading will be closed for the President's Day. Draghi's speech promises some action throughout the session, as market participants assume he will mention the upcoming March meeting of the Governing Council where a fresh decision to cut deposit interest rates is highly possible due to the recent market rout.
EUR/USD opens lower as risk appetite grows
Markets foresee a consolidation of the Euro in the nearest future, following sharp upward moves earlier over the two preceding weeks. Monday opened with the spot below 1.1246/38, namely the monthly R3 and weekly pivot point. The first bearish target to meet is Feb 9-10 lows at 1.1162, followed by the monthly R2, weekly S1 and 20-day SMA around 1.11. The bulls should rely on this dense support, given that daily technical indicators are confident the EUR/USD pair will be able to resume advancing.Daily chart
EUR/USD has breached the channel up pattern's lower edge, meaning sentiment is shifting to the downside. However, the spot of 1.1208 is nearing the 200-day SMA at 1.1196, which is still moving to the North. Inability to underpin the cross at this level would imply an extra sell-off towards the September 2015 low at 1.1086.
Hourly chart
Market sentiment picks up, but bears retain advantage
Meanwhile, less than a third of SAXO Bank clients are keeping the bullish bias with respect to EUR/USD. Adding to that, market sentiment is the worst precisely with respect to this currency pair on the OANDA market where only 40% of all trades are long. Possibly, it proclaims that the selling pressure has gone too far and the pair might become oversold in the near-term.