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EUR/USD Waits for ECB, Fed Catalyst- GBP Threatens Bearish Momentum

EUR/USD Waits for ECB, Fed Catalyst- GBP Threatens Bearish Momentum

David Song, Strategist

Talking Points:

- EUR/USD Holds Tight Range Ahead of ECB’s Targeted LTRO Program

- GBP/USD Risks Further Decline on Dovish BoE Minutes, Scotland Independence

- USDOLLAR Extends Advance Ahead of FOMC Meeting; Forward-Guidance in Focus

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EUR/USD

EUR/USD Waits for ECB, Fed Catalyst- GBP Threatens Bearish Momentum
  • Looks as though the EUR/USD will face a narrowing range as European Central Bank (ECB) looks to offer the targeted Long-Term Refinance Operation (LTRO) on September 18.
  • Depending on the outcome, ECB’s ‘turbocharged quantitative easing (QE)’ program may come under question on whether the non-standard measure will have the intended impact; may raise bets for more easing.
  • The DailyFX Speculative Sentiment Index (SSI) continues to narrow, but shows retail-crowd remains net-long on EUR/USD as ratio currently stands at +1.24.

GBP/USD

EUR/USD Waits for ECB, Fed Catalyst- GBP Threatens Bearish Momentum
  • GBP/USD looks poised for a larger rebound as the Relative Strength Index (RSI) comes off of oversold territory; need break of bearish momentum to favor topside targets.
  • Seems like Bank of England (BoE) Minutes will continue to show 7-2 split; biggest risk for surprise surrounds the Scotland Referendum, with the vote taking place on September 18.
  • Next key downside region to watch is the 1.6000 handle (50.0% retracement), but need to see a break and closing price above the 1.6280-1.6300 region (former support) to favor a larger rebound.

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Read More:

AUDCHF Monthly Opening Range Setup- Scalps Target Key Support

Dollar Looks to Fed to Secure Strongest Run in Half a Century

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10872.82

10883.13

10853.66

0.15

74.70%

EUR/USD Waits for ECB, Fed Catalyst- GBP Threatens Bearish MomentumEUR/USD Waits for ECB, Fed Catalyst- GBP Threatens Bearish Momentum

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar Index climbs.
  • A close above 10869 (78.6% retracement) raises the risk of seeing a full retracement of the decline from July 2013 high (11,009) especially as the RSI continues to push deeper into overbought territory.
  • The DailyFX SSI continues to show the retail-crowd remains net-short USD ahead of the Federal Open Market Committee (FOMC) interest rate decision; will look for a more detailed forward-guidance for monetary policy as the central bank looks to halt its asset-purchase program in October.

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Release

GMT

Expected

Actual

Advance Retail Sales (AUG)

12:30

0.6%

0.6%

Advance Retail Sales ex Autos (AUG)

12:30

0.3%

0.3%

Advance Retail Sales ex Auto and Gas

12:30

0.5%

0.5%

Advance Retail Sales Control Group (AUG)

12:30

0.5%

0.4%

Import Price Index (MoM) (AUG)

12:30

-1.0%

-0.9%

Import Price Index (YoY) (AUG)

12:30

-0.6%

-0.4%

U. of Michigan Confidence (SEP P)

13:55

83.3

84.6

Business Inventories (JUL)

14:00

0.4%

0.4%

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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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