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EURUSD Threatens Bullish Trend- Dovish ECB to Trigger Shorts

EURUSD Threatens Bullish Trend- Dovish ECB to Trigger Shorts

David Song, Strategist

Talking Points:

- USDOLLAR Rebounds as ISM Non-Manufacturing Tops Forecast

- Euro Threatens Key Support as EU Trims Growth Outlook

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10528.35

10540.22

10503.01

0.00

75.86%

USDOLLAR Daily

Forex_EURUSD_Threatens_Bullish_Trend-_Dovish_ECB_to_Trigger_Shorts_body_Picture_3.png, EURUSD Threatens Bullish Trend- Dovish ECB to Trigger Shorts

Chart - Created Using FXCM Marketscope 2.0

  • Holds November Range Ahead of Advance 3Q GDP
  • Relative Strength Index Carving Higher Highs/Higher Lows
  • Interim Resistance: 10,589 (50.0 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,290 (38.2 retracement) to 10,321 (78.6 expansion)

Release

GMT

Expected

Actual

ISM Non-Manufacturing (OCT)

15:00

54.0

55.4

IBD/TIPP Economic Optimism (NOV)

15:00

42.0

41.4

Fed’s Jeffrey Lacker Speaks on Employment

18:15

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) pared the overnight decline to 10,503 as the ISM Non-Manufacturing survey unexpectedly advanced to 55.4 in October, and the greenback may continue to threaten the bearish trend dating back to July as Boston Fed President Eric Rosengren argues that the central bank should be attentive to the possible costs associated with the quantitative easing program.

However, the reserve currency may face range-bound prices going into the advance 3Q GDP report as the world’s largest economy is expected to expand at a slower pace, and a marked slowdown in the growth rate may ultimately produce a lower high in the USDOLLAR as it heighten the Fed’s scope to carry its highly accommodative policy stance into 2014.

In turn, the dollar may face choppy price action until we get through the key data prints on tap for later this week, but we may see the bullish divergence in the Relative Strength Index finally get reflected in price should the fundamental developments top market expectations.

Forex_EURUSD_Threatens_Bullish_Trend-_Dovish_ECB_to_Trigger_Shorts_body_ScreenShot324.png, EURUSD Threatens Bullish Trend- Dovish ECB to Trigger Shorts

EURUSD Daily

Forex_EURUSD_Threatens_Bullish_Trend-_Dovish_ECB_to_Trigger_Shorts_body_Picture_1.png, EURUSD Threatens Bullish Trend- Dovish ECB to Trigger Shorts
  • Threatens Bullish Trend From July; Not Respecting Higher Low
  • Bullish Relative Strength Index Momentum Falters
  • Interim Resistance: 1.3830-40 (61.8 retracement)
  • Interim Support: 1.3490 (50.0 retracement) to 1.3455 (50.0 expansion)

Two of the four components weakened against the greenback, led by a 0.36 percent decline in the Euro, and the single currency may face additional headwinds ahead of the European Central Bank (ECB) interest rate decision as the European Union trims its growth forecast for the monetary union.

As a result, there’s growing bets that the ECB will implement a rate cut at the December 5 meeting, but we may see President Mario Draghi implement his own style of ‘verbal intervention’ in order to combat the growing threat for deflation.

In turn, the EURUSD may struggle to retain the bullish trend dating back to July, and we will be watching the downside targets for the pair as the fundamental outlook for the euro-area deteriorates.

--- 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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