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USDOLLAR Preserves Bullish Trend for February- EUR Eyes Lower Low

USDOLLAR Preserves Bullish Trend for February- EUR Eyes Lower Low

2014-01-30 15:50:00
David Song, Strategist
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Talking Points:

- USDOLLAR Maintains Bullish Trend Following $10B Taper, 4Q GDP

- Euro at Risk for Further Weakness on Dovish ECB- Lower Low Ahead?

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10684.31

10701.95

10663.67

0.15

92.67%

USDOLLAR Daily

Forex_USDOLLAR_Preserves_Bullish_Trend_for_February-_EUR_Eyes_Lower_Low_body_Picture_3.png, USDOLLAR Preserves Bullish Trend for February- EUR Eyes Lower Low

Chart - Created Using FXCM Marketscope 2.0

  • Retains Bullish Trend- Higher High on Tap for February?
  • Relative Strength Index
  • 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

Gross Domestic Product (Annualized) (QoQ) (4Q A)

13:30

3.2%

3.2%

Personal Consumption (4Q A)

13:30

3.7%

3.3%

GDP Price Index (4Q A)

13:30

1.2%

1.3%

Core PCE (QoQ) (4Q A)

13:30

1.1%

1.1%

Initial Jobless Claims (JAN 25)

13:30

330K

348K

Continuing Claims (JAN 18)

13:30

3000K

2991K

ISM Milwaukee (JAN)

14:00

54.50

52.82

Pending Home Sales (MoM) (DEC)

15:00

-0.3%

-8.7%

Pending Home Sales (YoY) (DEC)

15:00

-0.3%

-6.1%

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) may track higher in February as it retains the bullish trend carried over from the previous year, and the fundamental developments coming out of the world’s largest economy may continue to limit the downside risk for the greenback as the Federal Open Market Committee (FOMC) looks poised to deliver another $10B taper at the March 19 meeting.

With the U.S. economy growing an annualized 3.2 percent in the fourth quarter, the Fed should continue to wind down its asset-purchase program as the central bank sees a stronger recovery in 2014, and the USDOLLAR may probe fresh highs in the coming days as it carves a higher low around trendline support.

As a result, we will eye the topside targets going into the month ahead, and will for opportunities to ‘buy dips’ in the dollar as the Fed moves away from its easing cycle.

Join DailyFX on Demandto Cover Current U.S. Dollar Trade Setups

Forex_USDOLLAR_Preserves_Bullish_Trend_for_February-_EUR_Eyes_Lower_Low_body_ScreenShot034.png, USDOLLAR Preserves Bullish Trend for February- EUR Eyes Lower Low

EURUSD Daily

Forex_USDOLLAR_Preserves_Bullish_Trend_for_February-_EUR_Eyes_Lower_Low_body_Picture_1.png, USDOLLAR Preserves Bullish Trend for February- EUR Eyes Lower Low
  • Downtrend Taking Shape After Failure to Close Above 1.38; Accompanied by Bearish RSI
  • Interim Resistance: 1.3800 (100.0 expansion) to 1.3830 (61.8 retracement)
  • Interim Support: 1.3500 Pivot to 1.3530 (61.8 expansion)

Three of the four components lost ground against the dollar, led by a 0.58 percent decline in the Euro, and the bearish trend in the EURUSD may gather pace in the week ahead should the European Central Bank (ECB) show a greater willingness to further embark on its easing cycle.

The ECB is widely expected to retain its current policy at the February 6 meeting as President Mario Draghi sees a limit risk for deflation, but we may see the central bank implement another dovish twist tdo its forward-guidance amid the underlying weakness in the euro economy.

With that said, the EURUSD may continue to give back the rebound from November should the Governing Council highlight a greater risk to its economic outlook, and we may see a growing rift within the central bank as the region continues to face a protracted recovery.

--- 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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