- Difference between bulls and bears is minimal in favour of the latter
- After some long commands were successfully put to use, they repeatedly became mostly bearish
- Downside pressure is expected to build up ahead of the ECB decision
- Today aggregate daily technical indicators are signalling strongly to the South
- Economic events to watch over the next 24 hours: US MBA Mortgage Applications (Mar 4), Wholesale Inventories (Jan) and Crude Oil Inventories (Mar 4)
Thanks to an advance in investment spending, which offset weaker household consumption, the Euro zone economy expanded 0.3% in the final quarter of 2015 from three months to September. For the whole 2015, the Euro bloc's economy grew at the strongest pace in in four years, despite slowing toward the end of the year. The economy was 1.6% bigger last year than in 2014, according to Eurostat. The Euro zone economy slowed slightly in the second half of last year, as exports increased less slowly than imports amid a weaker demand from China and other developing economies. Consumer spending had been the main driver of growth in the previous nine months, but was outperformed by investment in the final quarter, which grew by 1.3% from the previous three-month period, a much stronger performance than the 0.4% increase recorded in the three months to September. ECB policy makers meet Thursday, when they are predicted to agree fresh stimulus measures in a bid to push the annual rate of inflation toward their target of just under 2%. Consumer prices dropped 0.2% on the year in February, the first such decline since September 2015. Moreover, there are indications that the Euro zone economy has slowed further in the early months of 2016, with surveys of purchasing managers indicating a more sluggish increase in activity, while measures of confidence among consumers and businesses have declined.
The Bank of England is more likely to hike interest rates than to cut them over the course of the next two years, and has plenty of scope to stimulate the UK economy if needed, said Martin Weale. Mr. Weale voted to raise the central bank's key rate during the second half of 2014 but abandoned the call at the beginning of last year. The policy maker also played down the significance of the turbulence in financial markets. Meanwhile, economists pushed back their bets on when the BoE would start to hike rates to early 2017, due to a weaker global economy and stubbornly low inflation. Moreover, Weale said that the BoE could cut rates to lower than 0.5% and introduce a new round of quantitative easing should the necessity arise. The scope of asset purchases could be expanded to include long-term holdings of private sector assets as well as government bonds. In the meantime, the head of the BoE warned that Britain's potential exit from the European Union could be the single biggest risk to the UK economy. Mark Carney highlighted that the central bank would remain neutral in the debate. However, Mr Carney said that international risks such as recent volatility in China were a greater problem for Britain's economy.
Upcoming fundamentals: Another data-empty day for EUR/USD before ECB later tomorrow
The fundamental outlook for the Euro is neutral on Wednesday, provided that the economic calendar is full of important events outside the Euro zone or the US. Markets are actively preparing for a trade after the European Central Bank's rate decisions on Thursday, meaning there is unlikely to be any focus on those few US indicators released throughout Wednesday. At 15:00 GMT the wholesale inventories data is up, while economists foresee a 0.2% monthly decline in January. This is going to be a good signal for economic growth, as rising inventories are normally able to improve any gloomy situation created by other GDP components.
EUR/USD resumes falling as ECB meeting begins
Daily technical indicators assume the EUR/USD currency pair will come under a heavy selling pressure on Wednesday when the ECB's two-day meeting starts. Yesterday the cross was denied by the 200-day SMA at 1.1043. The bears are setting eye on the demand cluster at 1.0974/58 where the 55-day SMA and weekly pivot point support each other. Failure here would allow for a loss down to 1.09 over the next 24 hours (100-day SMA and weekly S1), followed by the February low at 1.0809 in the long run.Daily chart
The outlook is mixed from the perspective of the one-hour chart. EUR/USD has been trading around the January uptrend since Friday of the last week, but there has been no trustworthy confirmation of this line yet. Expectations will become slightly more positive, in case the Euro consolidates above 1.1010. Until then, however, the bias is going to be negative.
Hourly chart
Pending orders unable to sustain gains, SWFX sentiment almost neutral
OANDA and SAXO Bank sentiment has been little changed over Monday. In both markets the bears are holding more than 50% of all open transactions at the moment. The only difference is the scope of the gap between the longs and shorts, which is about 10% with OANDA and reaches as much as 22% with SAXO Bank.
Spreads (avg,pip) / Trading volume / Volatility
More than three fourths of Dukascopy traders see the Euro higher against Greenback
In this week's time, the sentiment on this currency pair changed significantly, as now 76% of traders predict the Euro to rise in value. Among important news, on Thursday, the ECB is to announce its monetary policy decision. The rate announcement will be followed by a post-policy meeting press conference with President Mario Draghi.
As for opinions among members of the Dukascopy Community, williamb assumes that "this pair is ready to rise because it is oversold. Fundamentals also could contribute to pair's increase due to the weakness in the Asian market." From the other side of the coin, Khimit thinks that "the pair is running on a downtrend and a second break is visible around 1.10 mark. I am expecting a downtrend continuation.