- SWFX market sentiment is 53% bearish
- Pending commands in the 100-pip range 53% short
- Pair opened Monday's session at the 1.1005 level
- Aggregate daily technical indicators bet EUR/USD will depreciate
- Economic events to watch over the next 24 hours: US International Trade in Goods (May); US PMI Services (June); ECB President Draghi Speaks; EU Parliament to Vote on Resolution on UK Referendum.
According to the Ifo Institute of Economic Research, German business sentiment improved in June, despite all the turmoil caused by the EU referendum in UK. Economists were expecting the reading to disappoint, falling from 107.70 to 107.50, while the actual result was 108.7 points. The German Business Climate is calculated by a number of surveys from different firms and companies in a handful of sectors, such as construction, wholesales, manufacturing, retailing, services, which altogether provide insight on the German economy. The given release is important, as it tends to also provide a preliminary forecast for future economic activity and the economic conditions in the Eurozone overall. Furthermore, the survey consists of approximately seven thousand businesses, which are asked to assess the economic outlook for the upcoming six months. One of the Ifo's sub survey's showed that the economic conditions in Germany inched higher to 114.5 points in June, compared to the previous figure of 114.2 points. At the same time, the future prospects index was also calculated, showing a 103.1 point reading in the same month, slightly stronger than the previous number of 101.7 points, still in spite of the turbulence caused by the ‘Brexit' poll results. Other forecasts, however, suggest the situation is only going to worsen, as the ‘Brexit' is likely to have a domino effect, causing other ‘ships' to sink as well.
Meanwhile, growth in Germany's private sector ended the second quarter with a bigger-than-expected deceleration, a private survey estimated on Thursday, as a surprising upturn in manufacturing did not manage to offset weakness in services. Markit's Composite PMI, which tracks the manufacturing and services activity that accounts for more than two-thirds of the German economy, decelerated to 54.1 during the sixth month of the year, down from 54.5 seen in May, when it hit a joint five-month high. Analysts had predicted a mild downturn to 54.3 in June. The Services PMI fell to 53.2 in June from 55.2 in May, while the Manufacturing PMI rose to 54.4 from 52.1.
Upcoming fundamentals: US data and EU Parliament vote
Fundamental data, which will affect the EUR/USD pair will come from the US on Monday, as US International Trade in Goods for May will be released at 12:30 GMT, and US PMI Services is set to be published at 13:45 GMT. In the meantime, on Monday ECB President Mario Draghi will give a speech at the ECB Forum on Central Banking in Sintra, Portugal at 17:30 GMT. However, most important data in the next 24 hours is coming from the EU Parliament, as its members are set to vote on the Resolution on UK Referendum tomorrow morning at 8:00 GMT.
EUR/USD slightly recovers on Monday after Brexit slump
Daily chart: After suffering huge losses on the Brexit vote results, the Euro has slightly recovered against the US Dollar on Monday, as the currency exchange rate moved from 1.1005 at the start of Monday's trading session, to 1.1040 by 7:00 GMT. However, it is still more than 300 pips below the pre-Brexit vote levels of around 1.1380. In addition to the grim side, daily aggregate technical indicators forecast a decline for the pair today. In such case, it faces the monthly S1 at 1.0948.Daily chart
Hourly chart: The hourly chart shows that the European currency, stopped its downfall against the US Dollar after the Brexit referendum results, as it hit the monthly S1 at 1.0948. Since then, the pair has been volatile between the 20-hour SMA and the lower Bollinger band. At the moment, the currency exchange rate is moving north, and it is struggling with the 20-hour SMA. If the pair continues its movement upward, it will likely meet the weekly pivot point at 1.1144.
Hourly chart
SWFX traders bearish on Monday
OANDA trader bearish sentiment has decreased compared to Friday, when some of the OANDA traders went long on the pair. At the moment, 56.54% of OANDA open positions are short. In addition, SAXO Bank clients have increased their bearish stance, as their open short positions are now at 58.31% compared to 56% on Friday.