EUR/USD is bounded between 1.12 and 1.1280

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Source: Dukascopy Bank SA
  • 57% of all SWFX market positions are short
  • 60% of pending orders (both 50/100-pip ranges) are short
  • Immediate resistance at 1.1280 seems weaker than immediate support at 1.12, which skews the risks to the upside
  • Daily technical indicators are giving an aggregate formal "sell" signal, but as many as four different individual indicators (RSI, Stochastic, ADX and CCI) are neutral
  • Economic events to watch over the next 24 hours: ECB Vice-President Constancio Speaks twice; US Durable Goods Orders (Mar), Services PMI (Apr) and Consumer Confidence (Apr)

© Dukascopy Bank SA
Monday used to be a largely bullish day for the common European currency, owing to disappointing fundamentals outside of Europe, falling commodity prices and depressed equity markets. First of all, German IFO business climate index, despite being published noticeably worse than anticipated, failed to move the Euro down. Analysts remained focused on the only US data release concerning new home sales in March. Instead of growing, this indicator showed that the total annualized number of sold houses dipped to 511,000 last month from upward-revised 519,000 in February. With US Dollar weakening, the EUR/USD currency pair added 0.41% over yesterday. Commodity currencies were all down in the range of 0.31-0.44% amid a correction of oil prices. Meanwhile, the Japanese Yen resumed appreciating and added 0.16% against the Euro. Financial markets are concerned about the upcoming Fed meeting on Wednesday, which is expected to shed light on the issue of an interest rate hike in June. Helped by that, the haven climate drove the Yen somewhat to the North.

German companies remain upbeat about the economy, but fears about weakening exports due to a slowdown in the US and China are dampening the mood among German executives. Ifo Business Climate unexpectedly deteriorated in April, with the gauge slipping to 106.6 compared with 106.7 in the preceding month. In contrast, economists had expected the index to rise to 107.1 level within the month period. The European Central Bank's decision announced in March to cut its deposit rate further into negative territory as well as increase the pace of monthly asset purchases to 80 billion euro did not manage to spur the growth of the index. Even though the data disappointed, it is still an improvement on low figures at the end of last year. The Ifo Current Assessment sub-index, measuring current conditions in the Euro bloc's powerhouse, declined to 113.2 points, below last month's 113.8. The Ifo Expectations Index, indicating firms' expectations for the next six months, increased to 100.4 points, beating the previous figure of 100, while analysts had projected a marginal improvement to 100.9. Meanwhile, an alternative ZEW economic index survey showed a slight improvement as it inched higher to 11.2 from 4.3, while expectations were at 8 points. However it is still extremely low, as too many investors are still pessimistic about the next six months.

The Euro zone's private sector kept expanding moderately in April, but failed to gather momentum. The Markit Composite PMI, a forward-looking reading tracking development in the Euro bloc's manufacturing and services sectors came in at 53.0 in the reported month, down from 53.1 seen previously, when it rebounded from February's 13-month low. The manufacturing PMI declined to 51.5 in April, compared with 51.6 in the preceding month, while the services sector gauge rose to 53.2, slightly ahead of 53.1 in March, but undershooting economists' expectations of 53.3. The Euro zone's economic growth continued to be weak as the bloc's GDP expanded 0.3% in the final three months of 2015 on a quarterly basis, the same pace as in the three months through September. For all of 2015, economic output of the 19 countries using the Euro was up by 1.6% year-on-year. Business activity in Germany, the Euro zone's number one economy, decelerated more than expected in April. Markit's Composite PMI for Germany dropped to 53.8, down from 54.0 in March, which was the lowest level since September 2015. Economists, however, had expected acceleration to 54.2 in the reported month. Germany's manufacturing gauge climbed to 51.9, up from 50.7 in March, while the services PMI unexpectedly dropped to 54.6, down from 55.1.

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Upcoming fundamentals: ECB's Constancio to talk as major US data is due



Vice-president of the European Central Bank Vitor Constancio will speak twice on Tuesday. First of all, he will deliver welcome remarks to the first annual ECB macroprudential policy and research conference at 7:00 GMT. He will later speak at the same conference at 17:00 GMT in the afternoon. Meanwhile, this is a big day for US statistics. At 12:30 GMT the data for durable goods orders for March is due, where economists are expecting a considerable month-on-month rebound. Headline reading is forecasted to surge by 1.9% after a downward-revised drop of 3% in February, while excluding transportation items the indicator is predicted to add 0.5% in March (-1.3% in February). The consumer confidence index released by the Conference Board is out at 14:00 GMT. Average expectations call for a reading of 96 points in April, down from 96.2 in March.


EUR/USD is bounded between 1.12 and 1.1280

EUR/USD established itself in a tight range between the 1.12 and 1.1280 marks, both represented by major demand and supply areas, respectively. The former is ready to contain a decline of the Euro by the monthly pivot along with the 55-day SMA. From the upside, the cap is delivered by the weekly pivot and the 20-day SMA. It seems that there exists an upside potential, given that the mentioned resistance looks weaker than the cited support. On the other hand, daily technical indicators tend to disagree and they suspect the pair will soon tackle the lower bound.

Daily chart
© Dukascopy Bank SA

Pessimistic expectations of yesterday have not truly worked out, because the cross commenced a comeback and returned above the April 14 low. Nevertheless, the 200-hour SMA remains intact for a fourth consecutive day and this is adding to continuous bearish bets on the matter of pair's future. To support the bullish scenario, EUR/USD has to breach the area near 1.1292/1.13. Then the focus will be able to shift forward to the March 17 peak at 1.1343.

Hourly chart
© Dukascopy Bank SA

SWFX sentiment on EUR is 57% short

Following an increase in the value of the European currency on Monday, the total number of long positions opened in the SWFX market decreased to 43% from 44% by the morning of April 26. This proclaims that the bears are still capable of maintaining a great advantage over their bullish counterparts. As for pending orders, now about 60% of them are set to sell the Euro against the US Dollar in both 50 and 100-pip ranges from the current spot price.

Bullish share of the OANDA market bounced back to the level below 41% after staying above 42% yesterday. Something very similar happened with respect to SAXO Bank clients, as they are now EUR-short in exactly two thirds of all cases.














Spreads (avg,pip) / Trading volume / Volatility



Average forecast says EUR/USD will trade near 1.11 by July

Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between March 26 and April 26 expect, on average, to see the currency pair around 1.11 by the end of July. Though 58% (+1%) of participants believe the exchange rate will be generally below 1.12 in ninety days, with 44% (+1%) alone seeing it below 1.08. Alongside, only 24% of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on July 31.

© Dukascopy Bank SA

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