- There is only a slight advantage of sell orders (55%) over the buy ones (45%)
- SWFX market is in perfect equilibrium
- New reliable resistance is established at 1.1040
- Target is a cluster of supports at 1.0972/54
- Economic events: German Ifo Business Climate (Feb), US CB Consumer Confidence (Feb), Existing Home Sales (Jan)
Growth in the Euro zone's both the services and manufacturing sectors slowed in February, casting further doubts over the strength of the currency bloc's recovery. The Euro zone's composite PMI, which measure activity in the manufacturing and services sector, dropped to a 13-month low of 52.7 in February, down from a revised figure of 53.5 in January, coming in below expectations of 53.3. A separate survey showed the Euro zone's manufacturing PMI slid to 51.0 in the current month, compared with 52.3 seen in January. At the same time, the gauge, measuring business activity in the services sector, dropped to 53.0, down from 53.6 in January. The European Central Bank will be concerned about the PMI output price sub-index, which dropped to a one-year low of 48.6, down from 48.9 in January. Inflation was just 0.4% in January. There is an even chance that the central bank will expand its size of its 60 billion euros-a-month asset-buying programme next month, and another deposit rate cut is almost certain, economists say.
Manufacturing activity in Germany rose at a slower pace than in the preceding month. The PMI for the Euro zone's number one economy's industrial sector declined to 50.2 in February, the weakest level in 15 months. In France, however, the gauge booked 50.3 points in the current month, up from 50.0 points in January.
German business climate to worsen
The update on the business climate in Germany will be the main event concerning Euro Area today. The index is expected to decline from 107.3 down to 106.7. In the afternoon, the focus will shift to the United States, where confidence of consumers is estimated to deteriorate from 98.1 to 97.0, and the number of residential buildings sold is to decrease from 5.46M in December to 5.32M in January.
EUR/USD closes under moving average
The pair dipped under the 200-day SMA yesterday, which reinforces our near-term bearish outlook on the Euro. The intraday rallies are now to be contained by a new resistance level at 1.1046, while the immediate target is a cluster of supports at 1.0972/54. There, solid demand is implied by the lower bound of the channel, monthly R1, and 100-day SMA, and the price should thus bottom out and commence a multi-week recovery here.Daily chart
In the hourly chart, the pair accelerated the decline by leaving the emerging channel through the lower trend-line of the pattern and established a new reliable resistance level at 1.1040. The key support may thus be reached in the next few days, potentially even today.
Hourly chart
SWFX traders remain undecided
The sentiment among OANDA and Saxo Bank traders improved compared to yesterday's readings, but the general attitude remains bearish. At the moment, 55% (56% yesterday) of positions open at OANDA are short. An even greater percentage of traders are bears at Saxo Bank, namely 62% (64% yesterday).