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Bullish EURUSD Momentum Falters- Carves Top on ECB/Fed Policy

Bullish EURUSD Momentum Falters- Carves Top on ECB/Fed Policy

2013-09-23 15:45:00
David Song, Strategist
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Talking Points:

- USDOLLAR Consolidates as FOMC Remains Data-Dependent

- Euro Struggles as European Central Bank (ECB) Sticks to Easing Cycle

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10538.1

10562.92

10527.36

-0.24

65.60%

USDOLLAR Daily

Forex_Bullish_EURUSD_Momentum_Falters-_Carves_Top_on_ECBFed_Policy_body_Picture_3.png, Bullish EURUSD Momentum Falters- Carves Top on ECB/Fed Policy

Chart - Created Using FXCM Marketscope 2.0

  • USDOLLAR Eyes Sunday Gap Open as It Holds June Low (10,469)
  • Former Support Offers Interim Resistance: 10,582 (23.6 expansion) to 10,589 (50.0 retracement)
  • Soft Support: 10,469 (June low)
  • Relative Strength Index Carving Bullish Momentum

Release

GMT

Expected

Actual

Chicago Fed National Activity Index (AUG)

12:30

-0.05

0.14

Fed's Dennis Lockhart Speaks on U.S. Economy

13:20

Fed's William Dudley Speaks on U.S. Economy

13:30

Fed's Richard Fisher Speaks on Banking Sector

17:30

The near-term pullback the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) continued to take shape on Monday as New York Fed President William Dudley and Atlanta Fed President Dennis Lockhart voiced their support for the highly accommodative policy stance, but the reserve currency certainly looks poised for a more meaningful recovery as the central bank remains largely on track to implement its exit strategy over the coming months.

Indeed, the bullish breakout in the Relative Strength Index should limit the downside for the USD, and we may see the greenback trade on a firmer footing later this week as the final 2Q GDP report is expected to show an upward revision in the growth rate to 2.6 percent from an initial forecast of 2.5 percent.

In turn, the fundamental and technical developments should encourage a more meaningful recovery in the USDOLLAR, and we may see a move back into the 38.2 percent Fibonacci expansion around 10,652 should we see a growing number of Fed officials show a greater willingness to taper the asset-purchase program at the October 29-30 meeting.

Forex_Bullish_EURUSD_Momentum_Falters-_Carves_Top_on_ECBFed_Policy_body_ScreenShot133.png, Bullish EURUSD Momentum Falters- Carves Top on ECB/Fed Policy

EURUSD Daily

Forex_Bullish_EURUSD_Momentum_Falters-_Carves_Top_on_ECBFed_Policy_body_Picture_1.png, Bullish EURUSD Momentum Falters- Carves Top on ECB/Fed Policy
  • Poised to Mark Another Failed Attempt to Close Above 1.3530-40 (50.0 expansion)
  • RSI Comes Off of Overbought; Bullish Momentum Falters
  • Interim Resistance: 1.3650 (78.6 expansion) to 1.3710 (2013 high)
  • Former Resistance to Offer Support: 1.3360 (38.2 expansion) to 1.3380 Pivot

Three of the four components advanced against the greenback, led by a 0.67 percent rally in the Japanese Yen, while the Euro bucked the trend as European Central Bank (ECB) President Mario Draghi struck a rather dovish tone for monetary policy.

Indeed, Mr. Draghi argued that the Governing Council may implement another Long-Term Refinancing Operation (LTRO) to further insulate the monetary union, and it seems as though the ECB may have little choice but to further embark on its easing cycle as the governments operating under the monetary union become increasingly reliant on monetary support.

In turn, the EURUSD appears to be carving a top going into the end of September, and will for the downside targets to come into play amid the ongoing turmoil in the euro-area.

--- Written by David Song, Currency Analyst

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

To be added to David's e-mail distribution list, please follow this link.

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