- The number of bearish SWFX market participants bounced back to 55% from 57%
- Both 50 and 100-pip pending orders are set to buy EUR/USD in slightly more than 50% of all cases
- Increased bets for the Federal Reserve's rate hikes later in 2016 may overshadow its dovish statement tomorrow
- Aggregate daily technical indicators are predominantly undecided on March 15
- Economic events to watch over the next 24 hours: French CPI (Feb), Swedish CPI (Feb); US Retail Sales (Feb), PPI (Feb) and Empire State Manufacturing Index (Mar)
The Euro zone's industrial production increased at the fastest pace in more than six years in January, supported by a sharp rise in output in Germany and Ireland. While a surprising increase in German industrial output had hinted to strong start to the year across the currency bloc as a whole, the actual figure overshot economists' expectations. According to Eurostat, the Euro area's output surged 2.1% from December, the largest monthly gain since September 2009, and compared with analysts' forecast for a 1.6% rise. Moreover, the statistical agency revised December's decline from 1% to 0.5%. The January's advance was supported by Germany, where there was a 2.9% increase in production, while Ireland recorded a robust 12.7% rise in industrial production. Measured on an annual basis, the Euro zone's industrial output soared 2.8% in January, markedly up from the upwardly revised 0.1% decline in the prior month. The Euro area's economy continued slowing in the fourth quarter of the past year, with a clouded outlook and a slowdown in emerging markets threatening the currency bloc. Joint economic output of the 19 countries increased a meagre 0.3% in the December quarter, while for the whole 2015 the economy expanded 1.6%, compared with the 0.9% GDP growth recorded in 2014.
While weak inflation provides scope for further interest rate cuts, the Reserve Bank of Australia welcomed the nation's economy rebalancing. However, the central bank remained cautious amid signs that global volatility was impacting domestic demand. Minutes from the RBA's policy meeting showed that central bank retained easing bias in March, but it sees no immediate need for further reductions in the key interest rate. Economists are divided about whether the RBA will lower its cash rate from all-time low 2.0%, with some predicting two cuts in 2016, while other anticipate that the central bank will sit tight for the remained of the year. The RBA was contented with the progress the Australian economy is making in rebalancing towards non-mining sectors of the economy, helped by low interest rates and the depreciation of the exchange rate over the past couple of years. However, like most central banks, the RBA has become increasingly worried about the global financial conditions since the beginning of the year, with fears over China's economic health and uncertainty surrounding outlook for monetary policy in some major economies which has lead to elevated market volatility. Moreover, policy makers acknowledged that employment growth stalled in January following a robust gain in late 2015, while the jobless rate returned to 6%. Yet, the RBA noted that conditions in the labour market have noticeably improved since early 2015.
Upcoming fundamentals: EUR to be driven by US session, Fed expectations
European market session will not surprise from the fundamental side on Tuesday. All attention is going to be paid to America where a series of statistical indicators will be up at 12:30 GMT. Fresh monthly numbers will be available for retail trade and producer prices in the US, as well as for manufacturing activity in the state of New York. Moreover, markets are already slowly starting to focus on the Fed. The two-day March meeting begins today, while all decisions of the FOMC committee will be available Wednesday evening.
EUR/USD retreats to 1.11 as Fed rate bets rise
EUR/USD ended the Monday session with a slight loss of about 35 pips, as it touched the 1.11 mark where a declined was ultimately stopped. US Dollar gained ground amid expectations the Fed is going to raise interest rates, albeit only later in 2016 and not tomorrow. Considerable downturn is not expected, given a formidable support area under 1.1045. Contrary to that, we foresee a continuation of the leg up to the five-month downtrend at 1.1350, before another selloff takes place. Within the triangle pattern, trading range is likely to gradually narrow down.Daily chart
Based on the one-hour chart, there exists a good selling opportunity with respect to the observed cross. In case the 200-hour SMA, currently at 1.1027, fails to provide sufficient buoyant momentum, then we are going to expect an even deeper plunge to 1.0840 where two February-March trend-lines coincide together.
Hourly chart
Market positioning recovers in favour of the bullish side
OANDA and SAXO Bank markers have declared some improvement on a daily basis from Monday morning until Tuesday 7:00 GMT. With the former, the bullish share picked up from under-40% to 42.42%. However, this is low enough to rightfully claim that the EUR/USD still does have the worst sentiment among all OANDA-presented currency pairs. As for SAXO Bank, 65% of their traders are holding short open positions.