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EUR/USD Vulnerable to Hawkish Fed- Outlook May Hinge on T-LTRO

EUR/USD Vulnerable to Hawkish Fed- Outlook May Hinge on T-LTRO

2014-09-17 17:25:00
David Song, Currency Strategist
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Talking Points:

- EUR/USD Breaks Out of Bearish Momentum But Remains Vulnerable to Disappointing T-LTRO

- GBP/USD Closes September Gap Even as BoE Votes 7-2; RSI Coming Off of Oversold Territory

- USDOLLAR Remains Overbought; Outlook Hinges on FOMC’s Forward-Guidance

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EUR/USD

EUR/USD Vulnerable to Hawkish Fed- Outlook May Hinge on T-LTRO
  • May hold tight range as market participants weigh the take-up of the European Central Bank’s (ECB) Targeted Long-Term Refinancing Operations (T-LTRO); seeing expectations range from EUR 100B to EUR 150B.
  • The outcome of the T-LTRO may highlight the scope & magnitude of the ECB’s asset-back securities (ABS) purchase program as the central bank’ balance sheet is expected to near the early 2012 highs.
  • Even though the DailyFX Speculative Sentiment Index (SSI) continues to narrow, with the ratio continues to show net-long positioning as it stands at +1.14.

GBP/USD

EUR/USD Vulnerable to Hawkish Fed- Outlook May Hinge on T-LTRO
  • GBP/USD may fill the gap on a close-basis as U.K. Jobless Claims slips 37.2K, while Average Weekly Earnings including Bonus climbs 0.6%.
  • Nevertheless, it seems as though Bank of England (BoE) will retain its current policy as the meeting minutes continue to show 7-2 split, but the GBP/USD looks poised for a larger rebound as the Relative Strength Index (RSI) comes off of oversold territory.
  • Will watch former support zones for new resistance, with the first region of interest coming in around 1.6410 (61.8% retracement) to 1.6440 (23.6% expansion).

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Read More:

Price & Time: Why Late September Is So Important For EUR/USD

GBP/USD Rallied As BoE Voted 7-2 And UK Jobs, Wages Beat Forecast

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10868.12

10871.63

10835.08

0.19

89.83%

EUR/USD Vulnerable to Hawkish Fed- Outlook May Hinge on T-LTRO EUR/USD Vulnerable to Hawkish Fed- Outlook May Hinge on T-LTRO

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar Index could be marking a bullish inside day (Harami) ahead of the Federal Open Market Committee (FOMC) meeting as market participants look for a more hawkish twist to the forward-guidance for monetary policy.
  • If Fed disappoints & we get more of the same, batch of dovish commentary may serve as the fundamental catalyst to spur a larger correction in the USDOLLAR.
  • With that said, still need to see the RSI fall back from overbought territory & break the bullish momentum for confirmation & conviction for a near-term decline in the greenback.

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Release

GMT

Expected

Actual

MBA Mortgage Applications (SEP 12)

11:00

7.9%

Consumer Price Index (MoM) (AUG)

12:30

0.0%

-0.2%

Consumer Price Index (YoY) (AUG)

12:30

1.9%

1.7%

Consumer Price Index ex Food & Energy (MoM) (AUG)

12:30

0.2%

0.0%

Consumer Price Index ex Food & Energy (YoY) (AUG)

12:30

1.9%

1.7%

Consumer Price Index Core Index s.a. (AUG)

12:30

238.597

238.345

Consumer Price Index n.s.a. (AUG)

12:30

238.262

237.852

Current Account Balance (2Q)

12:30

-$113.3B

-$98.5B

NAHB Housing Market Index (SEP)

14:00

56.0

59

Federal Open Market Committee Interest Rate Decision

18:00

0.25%

Fed Pace of QE3 Purchases

18:00

$15B

Fed Pace of Treasury Purchases

18:00

$10B

Fed Pace of MBS Purchases

18:00

$5B

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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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