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USD Top in Place- EUR Divergence Favors Bearish Forecast

USD Top in Place- EUR Divergence Favors Bearish Forecast

2014-01-15 19:15:00
David Song, Strategist
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Talking Points:

- USDOLLAR Limited by Former Support; Retail Sales Rises for Ninth Month

- Bearish Euro Divergence Favors Downside Targets- RSI in Focus

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10710.17

10724.65

10664.61

0.42

159.95%

USDOLLAR Daily

Forex_USD_Top_in_Place-_EUR_Divergence_Favors_Bearish_Forecast_body_Picture_3.png, USD Top in Place- EUR Divergence Favors Bearish Forecast

Chart - Created Using FXCM Marketscope 2.0

  • Larger Range in Focus- Sideways Price
  • Bearish Divergence in Relative Strength Index to Provide Confirmation/Conviction
  • Interim Resistance: 10,753 (23.6 expansion) to 10,759 (61.8 retracement)
  • Interim Support: 10,561 (100.0 extension)- Closing Basis

Release

GMT

Expected

Actual

Empire Manufacturing (JAN)

13:30

3.00

12.51

Producer Price Index (MoM) (DEC)

13:30

0.4%

0.4%

Producer Price Index (YoY) (DEC)

13:30

1.1%

1.2%

Producer Price Index ex Food & Energy (MoM) (DEC)

13:30

0.1%

0.3%

Producer Price Index ex Food & Energy (YoY) (DEC)

13:30

1.3%

1.4%

Fed's Charles Evans Speaks on U.S. Economy

17:50

Federal Reserve Releases Beige Book

19:00

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

22:45

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) made a run at the monthly high (10,728) following the better-than-expected data, but the greenback may continue to consolidate over the near-term as it preserves the monthly opening range.

It still looks as though the dollar is carving a near-term top as it fails to put in a close above the soft resistance (10,716), and the greenback may track sideways over the near-term amid the limited reaction to the Fed’s Beige Book.

The technical outlook continues to favors the downside as the bearish divergence in the Relative Strength Index continues to take shape, and another close below 10,716 should present short-term selling opportunities as it fails to maintain the bullish trend from back in October.

Join DailyFX on Demand to Cover Current U.S. Dollar Trade Setups

Forex_USD_Top_in_Place-_EUR_Divergence_Favors_Bearish_Forecast_body_ScreenShot255.png, USD Top in Place- EUR Divergence Favors Bearish Forecast

EURUSD Daily

Forex_USD_Top_in_Place-_EUR_Divergence_Favors_Bearish_Forecast_body_Picture_1.png, USD Top in Place- EUR Divergence Favors Bearish Forecast
  • Retains Down Trend From 2008- Bearish RSI Divergence in Focus
  • Interim Resistance: 1.3800 (100.0 expansion) to 1.3830 (61.8 retracement)
  • Interim Support: 1.3530 (61.8 expansion) to 1.3570 (23.6 retracement)

The greenback rallied across the board, led by a 0.56 percent decline in the Euro and British Pound, but the single currency may face a larger decline than its U.K. counterpart as it preserves the bearish trend carried over from back in 2008.

With the bearish RSI divergence taking shape, it looks as though the EURUSD will continue to produce a series of lower highs over the near-term, and the pair may face a larger decline after the string of failed closes above the 1.3800 handle.

In turn, the longer-term trend may carry the EURUSD lower over the coming months, and we will target the downside objectives as the European Central Bank (ECB) remains poised to further embark on its easing cycle.

--- 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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