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Euro Risks Large Correction on Dovish ECB- Remains Bullish Above 1.35

Euro Risks Large Correction on Dovish ECB- Remains Bullish Above 1.35

David Song, Strategist

Talking Points:

- USDOLLAR Struggles Despite Upbeat Consumer Confidence Report

- EURUSD Weighed by Dovish ECB Rhetoric; Watching for Higher Low

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10558.33

10563.03

10539.91

0.09

60.98%

USDOLLAR Daily

Forex-Euro-Risks-Large-Correction-on-Dovish-ECB--Remains-Bullish-Above-1.35_body_Picture_3.png, Euro Risks Large Correction on Dovish ECB- Remains Bullish Above 1.35

Chart - Created Using FXCM Marketscope 2.0

  • Outlook Remains Bearish Following Lower High; At Risk for Lower Low
  • Interim Resistance: 10,602 (38.2 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,470 Pivot

Release

GMT

Expected

Actual

House Price Index (MoM) (JAN)

13:00

0.60%

0.5%

S&P/Case-Shiller Composite-20 s.a. (MoM) (JAN)

13:00

0.60%

0.85%

S&P/Case-Shiller Composite-20 (YoY) (JAN)

13:00

13.34%

13.24%

S&P/Case-Shiller Home Price Index (JAN)

13:00

165.73

165.50

Consumer Confidence (MAR)

14:00

78.5

82.3

Richmond Fed Manufacturing Index (MAR)

14:00

4

-7

New Home Sales (FEB)

14:00

445K

440K

New Home Sales (MoM) (FEB)

14:00

-4.9%

-3.3%

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

20:00

Fed's Charles Plosser Speaks on U.S. Economy and Monetary Policy

23:00

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is struggling to hold its ground despite the unexpected uptick in U.S Consumer Confidence, and the bearish trend may continue to take shape over the near-term as the greenback carves a lower high in March.

Despite expectations of seeing a more hawkish Fed in the coming months, the dollar may continue to carve lower highs & lower lows until the central bank halts its asset-purchase program later this year, and the greenback remains at risk of giving back the rebound from back in October (10,354) as the Chair Janet Yellen looks to carry the zero-interest rate policy (ZIRP) into 2015.

With that said, we will continue to look of opportunities to ‘sell bounces’ in the greenback as it remains capped by 10,600-15 region, and the reserve currency may continue to work its way towards the 10,470 handle as it continues to search for support.

Forex-Euro-Risks-Large-Correction-on-Dovish-ECB--Remains-Bullish-Above-1.35_body_ScreenShot262.png, Euro Risks Large Correction on Dovish ECB- Remains Bullish Above 1.35

EURUSD Daily

Forex-Euro-Risks-Large-Correction-on-Dovish-ECB--Remains-Bullish-Above-1.35_body_Picture_1.png, Euro Risks Large Correction on Dovish ECB- Remains Bullish Above 1.35
  • Remains at Risk for Larger Correction After Marking Higher High in March
  • Interim Resistance: 1.3960-70 (61.8% expansion)
  • Interim Support: 1.3600 Pivot to 1.3620 (23.6 retracement)

Join DailyFX on Demandto Cover Current Euro Trade Setups

The greenback advanced against two of the four components, led by a 0.38 percent decline in the Euro, and the single currency may weaken further ahead of the European Central Bank (ECB) meeting on April 3 as we see a growing number of central bank officials adopt a more dovish tone for monetary policy.

Indeed, ECB board member Jens Weidmann argued negative rates would be more appropriate in weakening the Euro, while Governing Council member Jozef Makuch anticipates further declines in the single currency, and it seems as though the central bank will push for a weaker exchange amid the ‘higher’ risk for deflation.

As a result, the ECB may continue to implement non-standard measures over the coming months, but we will need to see the EURUSD move below the 1.3500 handle to get increasingly bearish on the pair as it maintains the series of higher highs & higher lows carried over from the previous year.

--- 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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