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EUR/USD Bear Flag in Focus Amid Bets for ECB Corporate-Bond Purchases

EUR/USD Bear Flag in Focus Amid Bets for ECB Corporate-Bond Purchases

David Song, Strategist

Talking Points:

- EUR/USD Weighed by Talks of ECB Corporate Bond Purchases.

- AUD/USD Retains Wedge/Triangle Formation Ahead of 3Q CPI Report.

- USDOLLAR Holds Monthly Low Ahead of CPI; Existing Home Sales Beats Forecast.

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EUR/USD

EUR/USD Daily Chart
  • EUR/USD threatens channel support amid headlines the European Central Bank (ECB) will embark on corporate bond-purchases to further expand its balance sheet; expectations for additional monetary easing continues to build as the monetary union faces a growing risk of slipping back into recession.
  • Even beyond the fundamentals, the bear flag pattern continues to cast a bearish outlook, especially as the Relative Strength Index (RSI) fails to retain the bullish momentum from earlier this month.
  • Despite the recent volatility in the DailyFX Speculative Sentiment Index (SSI) retail crowd is currently net-long EUR/USD, with the ratio standing at +1.09.

AUD/USD

AUD/USD Daily Chart
  • Despite the better-than- expected 3Q GDP report out of China, AUD/USD remains stuck in the wedge/triangle formation as the Reserve Bank of Australia (RBA) continues to lay out a neutral tone and retains the verbal intervention on the aussie.
  • Australia’s Consumer Price Index (CPI) will be in focus as the headline & core rate of inflation are expected to slow in the third-quarter.
  • Waiting for an RSI break for a more meaningful directional bias; next downside target comes in around the 0.8600 pivot to 0.8610 (38.2% expansion).

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Read More:

Price & Time: When Does the USD Trend Resume?

EURCAD Hits Target- Long Scalps Eye 1.4457 Resistance

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10981.18

10986.61

10938.06

0.12

68.08%

EUR/USD Bear Flag in Focus Amid Bets for ECB Corporate-Bond PurchasesUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The Dow Jones-FXCM U.S. Dollar Index pares the decline from earlier this week as U.S. Existing Home Sales climbs 2.4% in September after contracting 1.8% the month prior.
  • Despite expectations for a faster recovery, the U.S. Consumer Price Index (CPI) may dampen interest rate expectations as the headline reading is expected to slow to an annualized 1.6% in September; need to see sticky core inflation to see a greater argument to normalize monetary policy sooner rather than later.
  • 10,869 (78.6% retracement) to 10,887 (61.8% retracement) remains in focus as the bearish RSI momentum remains in play, but lack of momentum to close below 10,950 (38.2% retracement) may highlight a near-term bottoming process.

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Release

GMT

Expected

Actual

Existing Home Sales (SEP)

14:00

5.10M

5.17M

Existing Home Sales (MoM) (SEP)

14:00

1.0%

2.4%

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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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