- SWFX market sentiment is 52% bearish
- Pending commands in the 100-pip range 56% short
- Pair opened Tuesday's session at the 1.1025 level
- Aggregate daily technical indicators bet EUR/USD will remain unchanged
- Economic events to watch over the next 24 hours: EU Economic Summit; ECB President Draghi Speaks; EU Parliament to Vote on Resolution on UK Referendum; ECB's Coeure Speaks; German Chancellor Merkel Speaks; ECB's Praet Speaks; US GDP (Q1); US PCE (Q1); US PCE Price Index Ex Food, Energy (Q1); US Consumer Confidence (June)
According to the European Central Bank, during the previous month the Euro zone money supply growth rose in May as well as the annual increase in loans to households improved. The broad monetary aggregate M3 jumped 4.9% on a yearly pace, following a 4.6% rise seen in April. Moreover, it was expected to reach 4.8%. Also, it is worth to point out, that both announcements rose on a faster-than-expected rate. The annual growth rate of loans to households came in at 1.6% in May, compared with 1.5% in April. Another data revealed that the yearly advance in credit to general government reached up to 11.1% in May, from 10.3% in April. Furthermore, the expansion of credit to the private sector reached 1.3% compared to the 1.1% in April. However, loans to non-financial corporations went up 1.4% after climbing 1.2% in April. Meanwhile, the ECB has launched a raft of policy measures in order to get credit flowing. In the meantime, the European markets faced another session of heavy losses at the beginning of the current week, being affected the unexpected result of the UK referendum on Thursday and Friday. The possibility that the UK will exit the European Union has left investors on edge. European stock market also was among the weakest performers.
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.
Upcoming fundamentals: US data and EU Economic Summit
New fundamental data releases affecting the Euro and the US Dollar on Tuesday will come from the US, as annualized GDP and PCE for first quarter of 2016 will be released at 12:30 GMT. In addition, US Consumer Confidence for June is set to be published at 14:00 GMT. In the meantime, it is the first day of the two day EU Economic Summit. The summits main topic is the UK's referendum on European Membership. First of all, ECB President Mario Draghi is set to speak at 8:00 GMT. Later in the day ECB's Coeure and Praet will give speeches respectively at 8:30 GMT and 11:00 GMT. In the meantime the German Chancellor Merkel will give a speech at 8:30 GMT, and the EU Parliament will convene and extraordinary plenary session to vote on a resolution analysing the outcome of the UK referendum.
EUR/USD continues to recover after Brexit on Tuesday
Daily chart: After Brexit on Monday, the Euro started recovering against the US Dollar by appreciating from 1.1007 at the start of Monday's session to 1.1023 at the end of day's trading. On Tuesday morning the currency exchange rate is continuing yesterday's recovery, as by 5:00 GMT the pair has surged from 1.1023 to 1.1060. One of the main reasons for this surge is the correction of the Euro's value after the markets might have overreacted on the UK's referendum vote results. However, aggregate daily technical indicators forecast, that the pair will remain unchanged today.Daily chart
Hourly chart: On the hourly chart it can be seen that the European Currency is rising steadily against the US Dollar on Tuesday morning, as it moved through the 20-hour SMA at 1.1026. However, at the moment the currency exchange rate is struggling with the 55-hour SMA at 1.1059. If it breaks the resistance, set up by the 55-hour SMA, the pair will most likely move up to the next resistance at 1.1144, which is represented by the weekly pivot point. Although, the rate might also fail and fall to the monthly S1 at 1.0948.
Hourly chart
SWFX traders bearish on Tuesday
OANDA trader bearish sentiment has increased compared to Monday's 56.54%, as, at the moment, 58.12% of OANDA open positions are short. In addition, SAXO Bank clients have increased their bearish stance, as their open short positions are now at 59.75% compared to 58.31% on Monday.