- SWFX traders continued to take profit; bearish outcome is now expected by 57% of them
- Pending orders are 50/50% divided between the bulls and bears in 100-pip range from the spot
- This week's outlook for the Euro is positive, as Fed is ready to release a dovish statement
- Weekly technical indicators see the pair growing, while daily studies are undecided
- Economic events to watch over the next 24 hours: Euro zone Industrial Production (Jan)
Canada's economy lost jobs in February and the unemployment rate climbed to the highest level in nearly three years, as low oil prices continued to undermine the country's resource-dependent provinces. Canada shed a net 2,300 jobs in February, according to Statistics Canada. While the decline appeared to be small, it was enough to push the unemployment rate to 7.3%, up from 7.2% in January, hitting the highest level since March 2013. In contrast, economists had expected a gain of 10,000 jobs and no change in the jobless rate. The biggest drop came in full-time jobs, as 52,000 fewer people were working in the sector, the biggest decline since September last year. The decrease was somewhat offset by new part-time positions, which surged 49,000. Despite this, the data showed a very discouraging sign, as the lack of full-time work indicated a stagnating economy and poor job availability. The Canadian economy has been hit hard by lower oil prices, which have shrunk the commodity-producing sector and significantly lowered business investment, affecting job growth. The BoC recently pointed out that Canada's job market has been performing well amid the oil price shock. Nevertheless, economists have warned that weak economic growth will eventually stall national employment.
European Central Bank President Mario Draghi unveiled bold easing measures, slashing interest rates and expanding asset purchases, in a bid to revive the Euro zone's struggling economy. The Frankfurt-based central bank cut the interest rate on the main refinancing operations by five basis points to zero, slashed deposit rate by 10 basis points to –0.4% and trimmed the marginal lending rate, used by banks to borrow from the ECB overnight, to 0.25% from 0.3%. On top of that, the ECB raised monthly asset purchases to 80 billion euros from 60 billion euros. Mr Draghi said that the central bank's stimulus measures are indented to last until March 2017 or longer if necessary. Moreover, the ECB chief implied interest rates would remain very low for at least another year, but played down expectations they could be slashed even further. ECB President said that the central bank's staff had revised downwards its inflation and growth expectations, estimating that even with extra stimulus, price growth will not reach its target for years to come and growth will weaken. The ECB predicts the annual GDP growth of 1.4% this year, down from 1.7% in the previous outlook in December. Also, Draghi cited a host of risks to economic growth from stumbling emerging economies, volatile financial markets and the snail pace of structural reforms.
Upcoming fundamentals: Euro zone manufacturing to surge considerably in January
Production sector in the common currency bloc has probably booked a significant pace of expansion in the first month of this year, given decent numbers we had got earlier from several countries including Germany. Industrial production, which is out at 10:00 GMT, is set to rise by 1.5% month-on-month in January after a 1% decline in the preceding month. The indicator is also estimated to be back into positive territory of 1.4% on a yearly basis.
EUR/USD expects more gains before FOMC
As we are entering the vital FOMC-led week today, the outlook for EUR/USD remains cautiously optimistic, particularly because the Fed is not forecasted to raise interest rates. The pair is largely backed by the 1.1050/00 area, where the 200-day SMA coincides with the 20-day SMA and monthly pivot point. Additionally, the 55-day SMA is placed at 1.0986. We see no failure here in the nearest future, as the base scenario implies a growth beyond the monthly R1 at 1.1227. The most important intermediate resistance is Feb high at 1.1377, followed by the four-month uptrend at about 1.1460.Daily chart
It seems that odds are beginning to favour a climb of the pair, according to the one-hour chart. The cross consolidated above several formidable technical levels, including the 200-hour SMA (1.0995) and the long-term uptrend at 1.1023. Now are watching both the September and October 2015 peaks at 1.1459/95 that are strengthened by the Dec-Feb trend-line.
Hourly chart
Market turns more bearish after ECB
The bulls have regained some ground over the last three days in both OANDA and SAXO Bank markets. Nevertheless, the portion of long market participants remains below 40% with OANDA and only marginally above 30% with SAXO Bank.