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EUR/USD Threatens 1.20- Downside Targets in Focus on Dovish ECB

EUR/USD Threatens 1.20- Downside Targets in Focus on Dovish ECB

David Song, Strategist

Talking Points:

- EUR/USD Fails to Break 1.20 Even as ECB’s Draghi Talks Up Quantitative Easing (QE).

- USD/CAD Breaks Out of Range; RSI Coming Up Against Overbought Territory.

- USDOLLAR Advance Capped by Weaker-than-Expected ISM Manufacturing.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • May only be a matter of time before EUR/USD breaks 1.20 as European Central Bank (ECB) President Mario Draghi sees a risk for deflation; fueling bets for quantitative easing at the January 22 meeting.
  • Downside break in Relative Strength Index (RSI) to favor a further decline in EUR/USD, with the next target coming in around 1.1960-70 (78.6% expansion).
  • May see stops get triggered on a move below 1.20 as the DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long EUR/USD since December 16, with the ratio currently standing at +1.63.

USD/CAD

USD/CAD Daily Chart
  • Weak crude oil prices may continue to drive USD/CAD higher as Bank of Canada (BoC) Governor Stephen Poloz remains in no rush to further monetary policy.
  • As RSI comes up against overbought territory, a topside push should provide conviction/confirmation for a further advance in dollar-loonie.
  • Next topside objective for USD/CAD comes in around 1.1750-60 (100% expansion).

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Read More:

"Everybody" Hates The Euro Again

Top Trading Opportunities of 2015

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11617.20

11622.67

11545.66

0.60

149.55%

EUR/USD Threatens 1.20- Downside Targets in Focus on Dovish ECB USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar struggling to hold its ground following the batch of dismal data prints; employment component of ISM Manufacturing may help to boost Non-Farm Payrolls (NFP) forecast as the index advanced to 56.8 from 54.9 in November.
  • Nevertheless, long-term outlook for USDOLLAR remains bullish as growing number of Fed officials show a greater willingness to normalize monetary; will have to see how the 2015 rotation will impact interest rate expectations.
  • Despite the lack of momentum to clear 11,623 (100% expansion), the RSI may highlight another topside move in USDOLLAR as the oscillator threatens the bearish momentum & looks to push back into overbought territory.

Join DailyFX on Demand for Real-Time SSI Updates!

Release

GMT

Expected

Actual

Markit Purchasing Manager Index- Manufacturing (DEC F)

14:45

54.0

53.9

ISM Manufacturing (DEC)

15:00

57.5

55.5

ISM Prices Paid (DEC)

15:00

44.0

38.5

Construction Spending (MoM) (NOV)

15:00

0.4%

-0.3%

Click Here for the DailyFX Calendar

--- Written by David Song, Currency Analyst

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

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