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EUR/USD Rally at Risk on Dovish ECB Draghi, More Detailed QE Program

EUR/USD Rally at Risk on Dovish ECB Draghi, More Detailed QE Program

2014-04-11 17:15:00
David Song, Strategist
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Talking Points:

- USDOLLAR Fails to Benefit From Stronger-than-Expected PPI, U. of Michigan Confidence.

- EUR/USD Extends Advance Ahead of ECB President Mario Draghi Press Conference.

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10421.5

10432.88

10407.18

0.11

68.13%

USDOLLAR Daily

EUR/USD USDOLLAR Chart

Chart - Created Using FXCM Marketscope 2.0

  • Poised for Larger Rebound as RSI Bounces Back from Oversold Territory
  • Interim Resistance: 10,602 (38.2 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,406 (1.618 expansion)

Release

GMT

Expected

Actual

Producer Price Index (MoM) (MAR)

12:30

0.1%

0.5%

Producer Price Index (YoY) (MAR)

12:30

1.1%

1.4%

Producer Price Index ex Food and Energy (MoM) (MAR)

12:30

0.2%

0.6%

Producer Price Index ex Food and Energy (YoY) (MAR)

12:30

1.1%

1.4%

U. of Michigan Confidence (APR P)

13:55

81.0

82.6

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The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) looks posed for a larger rebound as it holds above the 10,400 handle, but we will continue to look for opportunities to ‘selling bounces’ in the greenback as price and the Relative Strength Index (RSI) retain the bearish trend from earlier this year.

Indeed, the limited market reaction to the positive U.S. data prints continues to highlight the bearish sentiment surrounding the reserve currency, and the greenback may continue to carve a series of lower highs & lower lows throughout the remainder of the month as Fed Chair Janet Yellen remains in no rush to normalize monetary policy.

As a result, the fundamental developments coming out next week may do little to alter the Fed’s policy outlook as the central bank retains a cautious tone for the U.S. economy, and the dollar may continue to give back the advance from back in October (10,354) as the Federal Open Market Committee (FOMC) plans to further expand its balance sheet well into the second-half of 2014.

Read More:

Price & Time: Gold Overcomes Key Topside Retracement

Failure at Current Support Could See Major EUR/JPY, USD/JPY Selling

EUR-USD-Rally-at-Risk-on-Dovish-ECB-Draghi-More-Detailed-QE-Program-0215_body_ScreenShot084.png, EUR/USD Rally at Risk on Dovish ECB Draghi, More Detailed QE Program

EUR/USD Daily

EUR/USD Daily Chart
  • On Track to Mark First 5-Consecutive Days of Advance Since December
  • Interim Resistance: 1.3960-70 (61.8% expansion)
  • Interim Support: 1.3650 (78.6 expansion) to 1.3660 (23.6 retracement)

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The greenback gained ground against three of the four components, led by a 0.18 percent decline in the Australian dollar, while the EUR/USD bucked the trend, with the single currency advancing 0.09 percent.

The EUR/USD could be well on its way to the 1.4000 handle as the pair carves a higher low above interim support, but the press conference with European Central Bank (ECB) President Mario Draghi on April 13 may heavily influence the Euro next week as the Governing Council shows a greater willingness to further embark on its easing cycle.

With that said, the EUR/USD may struggle to preserve the advance from earlier this week should Mr. Draghi layout a more detailed quantitative-easing (QE) program, and the single currency may face a short-term pullback in the days ahead should the fresh batch of central bank rhetoric drag on interest rate expectations.

--- 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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