- 63% of pending orders are set to buy
- Long open positions remain below 50%
- Jul high at 1.1216 in focus of bullish attention
- Short traders to rely on impetus from 200-day SMA
- Economic events to watch in the next 24 hours: German, French, Spanish CPI (Jul), ECB Monetary Policy Meeting Accounts, US Retail Sales (Jul) and Unemployment Claims (Aug 7)
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Industrial production across 19-nation Euro zone dropped more than expected in June, suggesting weak investment continued to restrain economic activity in the region. According to Eurostat, industrial output dropped by 0.4% month-over-month in June, whereas economists had expected a monthly decrease of 0.1%. In annual terms, however, the measure rose by 1.2% from June last year. While services remain the biggest contributor to growth in the currency bloc, industrial production has a large indirect influence on other sectors.
The biggest decline in output came for factories in the durable consumer goods and capital goods sector. In contrast, energy rebounded from a series of drops in previous months to become the most improved sector. Factory output in June dropped in Germany, France and Italy when measured on a monthly basis, but increased 0.6% in Spain, Eurostat said. A decline of 0.2% in Greece appeared to be modest compared with May's 5.7% slump, an indication that doubts about Greece's Euro zone future was hurting economic activity.
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Upcoming fundamentals: ECB minutes in perspective
Minutes of the most recent ECB meeting are due today at 11:30 GMT. The regulator left its monetary policy unchanged and gave no hints of any possible early end of the QE programme. However, markets will wait for a report on debates surrounding Greek crisis, including a part on debt relief and ELA increase. Among core fundamentals on Thursday, US retail sales are forecasted to add 0.6% in July after a decrease of 0.3% a month before, while jobless claims will most probably stay broadly flat around 270,000 for the week ended August 7.
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EUR/USD touches July high, gains 110 pips
EUR/USD surged the most since Jul 29 on fears the Fed may not hike rates in September. As a result, the Euro pierced through a resistance zone at 1.1080, reached a daily high at 1.1216 (Jul high), but was forced to close below the 200-day SMA at 1.1154. While bulls are aiming at last month's high at the moment, they should be wary of the simple moving average, which may provide the pair with bearish momentum. As long as the Jul high is not confirmed, our outlook remains quite negative for the next 24 hours, as risks of a bearish correction are still in place.Daily chart
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However, the one-hour chart shows that EUR/USD managed to consolidate well above the bearish channel's upper boundary. Therefore, it is now officially confirmed by bulls, as they are already refocusing their attention on higher levels. Among them, the 23.6% Fibonacci retracement of last year's downtrend is placed at 1.1295, even though an immediate supply is Jul high at 1.1216.
Hourly chart
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SWFX sentiment bearish, long pending orders at 63%
Meanwhile, bullish positions at OANDA account for just 32.61% at the moment, while SAXO Bank market participants are also remaining strongly pessimistic towards the common currency, as only one in four traders is long at the moment.
Spreads (avg,pip) / Trading volume / Volatility
Community members expect Euro to weaken by the end of the week
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Only a minority (27%) of participants in the weekly quiz expect the bullish movement for the EUR/USD currency pair. The median forecast for Friday of this week is located around the 1.08 mark.
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A proponent of a near-term decline, Lukas, suggests that in the long-term "the EUR/USD pair could reach 0.9 level but it still hard to predict.". On the other hand, al_dcdemo is bullish on the Euro, as he thinks that EUR/USD "will remain at current levels at least until the end of the summer." Also, he supposes that "we will see a correction to 1.20 before any further decline."
Average forecast says EUR/USD will trade at 1.10 by November
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between Jul 13 and Aug 13 expect, on average, to see the currency pair around 1.09 by the end of November. Though the majority of participants, namely 61% of them, believe the exchange rate will be strongly below 1.10 in ninety days, with 37% alone seeing it below 1.06. Alongside, 19% of those surveyed reckon the price will trade in the range between 1.10 and 1.16 by the end of November of this year. © Dukascopy Bank SA