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Euro Range in Focus- USD/JPY Downside Targets Remain Favored

Euro Range in Focus- USD/JPY Downside Targets Remain Favored

David Song, Strategist

Talking Points:

- EUR/USD Range in Focus; EU Court Ruling in Favor of ECB’s OMT Program.

- USD/JPY Slips to Fresh Monthly Low as Risk Appetite Continues to Falter.

- USDOLLAR Weighed by Dismal U.S. Retail Sales; Risks Larger Correction on Weak CPI.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD pares decline to 1.1726 even as European Court of Justice rules in favor of the European Central Bank’s (ECB) Outright Monetary Transactions (OMT) program; close above 1.1740 may continue to signal range-bound prices ahead of the January 22 meeting.
  • With growing expectations of seeing the ECB announce its quantitative easing (QE) program next week, may see a short-squeeze in EUR/USD should the Governing Council fail to act.
  • DailyFX Speculative Sentiment Index (SSI) show retail crowd remains net-long EUR/USD, with the ratio currently standing at +1.18.

USD/JPY

USD/JPY Daily Chart
  • USD/JPY extends decline as risk appetite continues to wane; downside targets remain favored as the Relative Strength Index (RSI) retains the bearish momentum.
  • Need to see a close below 116.10 (61.8% retracement) for conviction/confirmation for a larger pullback in USD/JPY.
  • May see a test of the December lows (115.55) followed by 114.55 (78.6% retracement) should the Japanese Yen continue to benefit from the drop in market sentiment.

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Read More:

Price & Time: USD/JPY Topping Out Or Just Consolidating?

Momentum Gathering Pace in EUR-crosses - Watch EUR/USD 5-EMA

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11615.9711665.8611588.21-0.27168.06%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar falls to a fresh weekly low of 11,587 following as Retail Sales report disappoints; may face a larger pullback should it fail to close above 11,623 (23.6% retracement).
  • May see the dollar face additional headwinds later this week should the U.S. Consumer Price Index (CPI) show a greater risk for disinflation & drag on interest rate expectations.
  • Break of the bullish RSI momentum may highlight a larger USDOLLAR decline, with the next downside objective coming in around 11,567 (38.2% retracement).

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ReleaseGMTExpectedActual
MBA Mortgage Applications (JAN 9)12:00--49.1%
Advance Retail Sales (MoM) (DEC)13:30-0.1%-0.9%
Advance Retail Sales ex Auto (MoM) (DEC)13:300.0%-1.0%
Advance Retail Sales ex Auto & Gas (MoM) (DEC)13:300.5%-0.3%
Advance Retail Sales Control Group (DEC)13:300.4%-0.4%
Import Price Index (MoM) (DEC)13:30-2.7%-2.5%
Import Price Index (YoY) (DEC)13:30-5.2%-5.5%
Business Inventories (NOV)15:000.3%
Fed Publishes Beige Book Economic Survey19:00

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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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