Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points

  • Euro: Greece To Reach a Deal ‘In Coming Days,’ EU Summit In Focus
  • British Pound: Struggles To Test 23.6% Fib, U.K. Retail Sales Rebounds
  • U.S. Dollar: Benefits From Risk Aversion, Philadelphia Fed Survey On Tap

Euro: Greece To Reach a Deal ‘In Coming Days,’ EU Summit In Focus

The Euro pared the overnight decline to 1.3081 as European policy makers increased their pledge to address the debt crisis, while the Troika – the EU, ECB, and the IMF – anticipates to reach a deal with Greece in the ‘coming days’ even as the region looks for a two-year extension to meet its budget target.

Indeed, headlines coming out of the EU Summit may prop up the EURUSD over the remainder of the week as the group makes a greater push for fiscal integration, but hopes surrounding the meeting may fail to materialize as the governments operating under the monetary union continue to act in their own interest.

German Chancellor Angela Merkel floated a new aid fund that will ‘introduce a new element of solidarity’ amid the ongoing rift within the EU, and said the new initiative will ‘give all member states the opportunity then to improve their competitiveness and to actually be able to implement these commitments.’ At the same time, the German leader argued that ‘joint liability is the wrong answer’ as the periphery countries struggle to get their house in order, and the EU Summit may do little to restore investor confidence should the group fail to introduce additional measures to stem the risk for contagion.

As the EURUSD struggles to hold above the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120, the pair certainly appears to be carving out a double-top, and we may see the bearish formation take shape as European policy makers maintain a relaxed approach in addressing the risks surrounding the region. In turn, we may see the EURUSD revert back to the 200-Day SMA at 1.2828, but the pair may ultimately threaten the 23.6% Fib around 1.2640-50 as the fundamental outlook for the region remains weak.

British Pound: Struggles To Test 23.6% Fib, U.K. Retail Sales Rebounds

The British Pound struggled to maintain the advance to 1.6170 even as U.K. retail sales topped market expectations, and the sterling may continue to consolidate over the remainder of the week as it struggles to push back above the 23.6% Fib from the 2009 low to high around 1.6200.

Nevertheless, we will maintain our bullish call for the GBPUSD as the relative strength index continues to come off of support around the 43 figure, and the shift in the policy outlook should prop up the sterling over the near to medium-term as a growing number of Bank of England officials scale back their willingness to expand the balance sheet further.

As the U.K. gradually emerges from the double-dip recession, we should see the BoE continue to soften its dovish tone for monetary policy, and the Monetary Policy Committee may look to endorse a wait-and-see approach throughout the remainder of the year as growth and inflation slowly picks up.

U.S. Dollar: Benefits From Risk Aversion, Philadelphia Fed Survey On Tap

The greenback regained its footing on Thursday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) advancing to a high of 9,869, and the reserve currency may continue to retrace the decline from earlier this week as market participants scale back their appetite for risk.

However, as the Philadelphia Fed survey is expected to the first positive print since April, a print of 1.0 or higher may spark a rebound in risk sentiment, but the data should have larger implications on the policy outlook as the world’s largest economy gets on a more sustainable path. As the recovery gradually gathers pace, we should see a growing number of Fed officials strike a more neutral tone for monetary policy, and the FOMC may have little choice but to maintain its current policy over the remainder of the year as the central bank continues to see a limited risk for a double-dip recession.

FX Upcoming










Philadelphia Fed. (OCT)






Leading Indicators (SEP)



--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

Related Articles: Weekly Currency Trading Forecast