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EUR/USD Vulnerable on Slowing Inflation- U.S. 2Q GDP Tops Forecast

EUR/USD Vulnerable on Slowing Inflation- U.S. 2Q GDP Tops Forecast

2014-08-28 15:00:00
David Song, Strategist
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Talking Points:

- EUR/USD Remains Oversold; Vulnerable to Further Losses on Slowing Inflation

- USD/CAD Bearish Momentum in Focus Ahead of Canada’s 2Q GDP Report

- USDOLLAR Pares Losses on Upward Revision to 2Q GDP; RSI Struggling to Hold Bullish Trend

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EUR/USD

EUR/USD Vulnerable on Slowing Inflation- U.S. 2Q GDP Tops Forecast
  • May fail to close the opening weekly gap ahead of the European Central Bank (ECB) on September 4 as Relative Strength Index (RSI) holds in oversold territory.
  • May see growing speculation for additional monetary support should the Euro-Zone Consumer Price Index (CPI) highlight a greater threat for deflation.
  • The DailyFX Speculative Sentiment Index (SSI) continues to warn of a further decline in the EUR/USD as retain crowd is turning increasing net-long on the pair, with the ratio standing at 1.96.

USD/CAD

EUR/USD Vulnerable on Slowing Inflation- U.S. 2Q GDP Tops Forecast
  • Looks as though the USD/CAD will hold above 1.0820 (61.8% retracement) to 1.0830 (61.8% retracement) ahead of Canada’s 2Q GDP, which is expected to show a 2.7% rise in the growth rate.
  • May see the Bank of Canada (BoC) come under increased pressure to adopt a more hawkish tone for monetary policy at the September 3 meeting should the 2Q GDP report raise the outlook for growth and inflation.
  • Next downside objective comes in around 1.0780 (38.2% expansion) to 1.0790 (50.0% retracement).

Join DailyFX on Demand for Real-Time SSI Updates Across the Majors!

Read More:

Price & Time: In Search of A Low in the Euro Next Week

Sharp CAD Reversal Negates USD/CAD Bull Flag, Stuns EUR/CAD, GBP/CAD

USDOLLAR

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10633.66

10639.95

10616.12

-0.04

81.91%

EUR/USD Vulnerable on Slowing Inflation- U.S. 2Q GDP Tops ForecastEUR/USD Vulnerable on Slowing Inflation- U.S. 2Q GDP Tops Forecast

Chart - Created Using FXCM Marketscope 2.0

USDOLLAR(Ticker: USDollar):

  • Dow Jones-FXCM U.S. Dollar Index rebounds from a fresh weekly low of 10,616 as the advance 2Q GDP report shows an unexpected upward to 4.2% from an initial forecast of 4.0%, marking the fastest pace of growth since 3Q 2013.
  • Core Personal Consumption Expenditure (PCE) continues to highlight sticky inflation as it shows the highest reading since 1Q 2012; will it be enough to shift the Fed’s forward-guidance for monetary policy?
  • Still waiting for a break of the bullish RSI momentum to favor a larger USDOLLAR correction; former resistance around 10,555 (50.0% retracement) to 10,561 (100% expansion) remains in focus.

Join DailyFX on Demand for Real-Time SSI Updates!

Release

GMT

Expected

Actual

Gross Domestic Product (Annualized) (2Q S)

12:30

3.9%

4.2%

Personal Consumption (2Q S)

12:30

2.4%

2.5%

Gross Domestic Product Price Index (2Q S)

12:30

2.0%

2.1%

Core Personal Consumption Expenditure (QoQ) (2Q S)

12:30

2.0%

2.0%

Initial Jobless Claims (AUG 23)

12:30

300K

298K

Continuing Claims (AUG 16)

12:30

2510K

2527K

Pending Home Sales (MoM) (JUL)

14:00

0.5%

3.3%

Pending Home Sales (YoY) (JUL)

14:00

-3.5%

-2.7%

Kansas City Fed Manufacturing Activity (AUG)

15:00

7

3

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--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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