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EUR/USD Retains Bullish Sequence Ahead of US Confidence, Yellen Speech

EUR/USD Retains Bullish Sequence Ahead of US Confidence, Yellen Speech

2017-06-27 10:00:00
David Song, Currency Strategist
Share:

- U.S. Consumer Confidence to Narrow for Third Consecutive Month.

- Will Chair Janet Yellen Still Endorse Three Rate-Hikes for 2017?

Trading the News: U.S. Consumer Confidence

U.S. Consumer Confidence

Another downtick in the Conference Board’s U.S. Consumer Confidence survey may open up the topside targets for EUR/USD as the recent wave of dismal data prints drags on interest-rate expectations.Waning household sentiment may further dampen the Fed’s scope to implement higher borrowing-costs as officials warn ‘market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.’

Why Is This Event Important:

It seems as though market participants are unconvinced the Federal Open Market Committee (FOMC) will deliver three rate-hikes in 2017 as Fed Fund Futures highlight a 50/50 chance for a move in December, with the dollar at risk of exhibiting a more bearish behavior especially as U.S. 30-Year Treasury Yields push to fresh yearly lows going into the end of June. Nevertheless, fresh comments from Chair Janet Yellen may spark a bullish reaction in the greenback as the FOMC presents a preset plan to unload its balance sheet, and the central bank head may show a greater willingness to change gears over the coming months as the economy approaches full-employment.

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Impact that the Consumer Confidence survey has had on EUR/USD during the previous print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAY

2017

05/30/2017 14:00:00 GMT

119.5

117.9

-13

-6

May 2017 U.S. Consumer Confidence

EUR/USD 5-Minute

EUR/USD Chart

The Conference Board’s U.S. Consumer Confidence survey narrowed more-than-expected in May, with the figure slipping to 117.9 from a revised reading of 119.4 in April. At the same time, the gauge for future expectations also showed a similar dynamic as the index fell to 102.6 from 105.4 during the same period. The initial market reaction was short-lived, with EUR/USD pulling back from a session a high of 1.1205 to end the day at 1.1185.

How To Trade This Event Risk(Video)

Bearish USD Trade: U.S. Household Sentiment Continues to Weaken

  • Need a green, five-minute candle following the release to favor a long EUR/USD position.
  • If the market reaction favors a bearish dollar trade, buy EUR/USD with two separate lots.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bullish USD Trade: Conference Board Survey Exceeds Market Expectations

  • Need a red, five-minute EUR/USD candle to favor a long dollar trade.
  • Carry out the same setup as the bearish dollar position, just in reverse.

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart - Created Using Trading View

  • Recent series of higher highs & lows may spark a run at the monthly-high (1.1296), with the broader outlook for EUR/USD still constructive as the shift in market behavior continues to unfold.
  • Nevertheless, the euro-dollar exchange rate merely consolidate going into the end of the month/quarter as it remains stuck in a narrow range, with the Relative Strength Index (RSI) highlighting a similar behavior.
  • Failure to preserve the upward trend from April may stoke a larger pullback in EUR/USD, with a break/close below the 1.1130 (61.8% retracement) hurdle opening up the former-resistance zone around 1.0980 (50% retracement) to 1.1020 (50% expansion).
  • Interim Resistance: 1.1330 (23.6% expansion) to 1.1340 (78.6% retracement)
  • Interim Support: 1.0780 (100% expansion) to 1.0830 (38.2% retracement)

Make Sure to Check Out the DailyFX Guides for Additional Trading Ideas!

IG Sentiment

Retail trader data shows 28.1% of traders are net-long EUR/USD with the ratio of traders short to long at 2.56 to 1. In fact, traders have remained net-short since April 18 when EUR/USD traded near 1.0589; price has moved 5.6% higher since then. The number of traders net-long is 13.6% higher than yesterday and 5.8% lower from last week, while the number of traders net-short is 7.9% lower than yesterday and 8.1% lower from last week. For more information on retail sentiment, check out the new gauge developed by DailyFX based on trader positioning.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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