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EUR/USD Carves Narrowing Range as ECB Buys Time- NFP in Focus

EUR/USD Carves Narrowing Range as ECB Buys Time- NFP in Focus

David Song, Strategist

Talking Points:

- EUR/USD Holds Weekly Range as ECB Offers Limited Details Surrounding Non-Standard Measures.

- USD/JPY Vulnerable to Larger Correction Amid Bearish RSI Break.

- USDOLLAR Threatens Ascending Channel Formation as Bullish Momentum Wanes.

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EUR/USD

EUR/USD Chart
  • EUR/USD carving narrowing range as European Central Bank (ECB) keeps benchmark interest rate at 0.05% while providing limited details surrounding the asset-back securities (ABS) and covered-bond purchase program.
  • Could be seen as an attempt from the ECB to buy time as President Mario Draghi wants to see the take up of the second targeted long-term refinancing operation (T-LTRO).
  • The DailyFX Speculative Sentiment Index (SSI) continues to reflect net-long positioning in EUR/USD as the ratio stands at +1.22, but may continue to serve as a contrarian indicator as the Relative Strength Index (RSI) retains the bullish momentum.

USD/JPY

USD/JPY Chart
  • USD/JPY risks a more meaningful correction as the RSI breaks down from the bullish trend; long-term outlook remains bullish amid the deviation in the policy outlook.
  • Bank of Japan (BoJ) policy meeting on October 7 may serve as a fundamental catalyst to trigger a larger pullback should Governor Haruhiko Kuroda refrain from further expanding the asset-purchase program.
  • Will continue to watch the downside targets, with former resistance coming in around 105.20 (50.0% expansion) to 105.35 (50.0% retracement).

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Read More:

Price & Time: NZD/JPY Bear Pattern Hangs in the Balance

EURCAD Shorts at Risk Ahead of ECB- Key Support 1.4053

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11014.39

11047.26

10999.75

-0.27

93.81%

EUR/USD Carves Narrowing Range as ECB Buys Time- NFP in FocusUSDOLLAR Chart

Chart - Created Using FXCM Marketscope 2.0

  • The Dow Jones-FXCM U.S. Dollar Index looks a little exhausted as it struggles to hold above channel support, while the RSI remains capped around the 83.00 region.
  • U.S. Non-Farm Payrolls are projected to increase 215K in September along with a further uptick in wage growth; will we see an upward revision in August’s 142K print?
  • Need to see the RSI break the bullish momentum to favor a larger correction; key former resistance zone comes in around 10, 752 (38.2% expansion) to 10,759 (61.8% retracement).

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Release

GMT

Expected

Actual

Challenger Job Cuts (YoY) (SEP)

11:30

--

-24.4%

Initial Jobless Claims (SEP 27)

12:30

297K

287K

Continuing Claims (SEP 20)

12:30

2425K

2398K

ISM New York (SEP)

13:45

--

63.7

Factory Orders (AUG)

14:00

-9.5%

-10.1%

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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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