Talking Points:
- EUR/USD Bullish Formation Under Pressure Ahead of ECB Meeting.
- USD/JPY Rebound Mired by Bearish RSI Momentum, Wait-and-See BoJ.
- USDOLLAR Recovery Continues Despite Mixed Data; Widening Dissent Within Fed?
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Chart - Created Using FXCM Marketscope 2.0
- Ongoing series of lower highs in EUR/USD may highlight a further decline should former resistance around1.1180 (23.6% expansion) to 1.1210 (61.8% retracement) fail to provide near-term support, with the RSI failing to retain the bullish formation from July.
- In light of the dovish rhetoric coming out of the European Central Bank (ECB), a greater willingness to further embark on the easing cycle at the September 3rd policy meeting may produce near-term headwinds for the single currency.
- DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long EUR/USD since March 9, but the ratio remains of off recent extremes as it sits at -1.65, with 38% of traders long.
USD/JPY
- Sharp rebound in USD/JPY may carry into September should the RSI breakout of the bearish formation; may see the dollar-yen continue to move in tandem with risk sentiment as the Bank of Japan (BoJ) continues to endorse a wait-and-see approach.
- Despite the efforts by China to restore investor confidence, may see market sentiment continue to falter without a larger response from the major central banks.
- Along with a bullish RSI trigger, would favor a closing price above former-resistance zone around 121.70-80 (38.2% expansion) to favor a resumption of the long-term bull trend.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12022.67 | 12038.29 | 11975.74 | 0.22 | 99.68% |
Chart - Created Using FXCM Marketscope 2.0
- Despite the unexpected slowdown in the U.S. Core Personal Consumption Expenditure (PCE), the Dow Jones-FXCM U.S. Dollar continue to carve a series of higher lows & highs.
- May see the dollar trade on a firmer footing ahead of the Fed’s September 17 interest rate decision as Vice-Chair Stanley Fischer sees inflation returning to the 2% target, with the door open for a rate hike next month.
- The sharp rebound may spur another test of 12,049 (78.6% retracement), but need a closing price above the key region to favor a resumption of the long-term bullish trend amid the failed attempts from earlier this year.
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--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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