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Retail FX Remains Net-Long EUR/USD Ahead of U.S. CPI, ECB Meeting

Retail FX Remains Net-Long EUR/USD Ahead of U.S. CPI, ECB Meeting

David Song, Strategist

Talking Points:

- EUR/USD Slips to Fresh Monthly Low Following SNB; ECB QE Bets Priced-In?

- USD/CAD Risks Larger Correction as RSI Threatens Bullish Momentum.

- USDOLLAR Continues to Track Sideways Ahead of CPI, U. of Michigan Confidence.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD extends decline following the surprise rate cut from the Swiss National Bank (SNB) especially as the European Central Bank (ECB) is widely expected to announce its quantitative easing (QE) program next week.
  • Seeing market forecasts between EUR 500B to EUR 1T for the ECB’s QE program, but may see limited details surrounding the non-standard measure should the council look to buy more time.
  • DailyFX Speculative Sentiment Index (SSI) show retail crowd remains net-long EUR/USD, with the ratio now climbing to +1.40.

USD/CAD

USD/CAD Daily Chart
  • USD/CAD risks a larger pullback amid the lack of momentum to close above 1.2000; want to see a bearish break in the Relative Strength Index (RSI) to favor the downside targets.
  • Will keep a close eye on oil prices given recent correlation with the Canadian dollar; may see a near-term recovery in crude as it fails to close below the $45 handle.
  • Will watch former resistance zones for new support on a break & close below 1.1790 (78.6% expansion) -1.1800 (38.2% expansion).

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Read More:

Price & Time: A Central Bank Blinks

Implications for EUR/USD, EUR/GBP after SNB Floor Collapses

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11637.9611664.6511585.110.07164.06%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Keeping a close eye on the closing price for Dow Jones-FXCM U.S. Dollar amid the range-bound price action; .
  • U.S. Consumer Price Index (CPI) may drag on interest rate expectations on the back of falling energy prices; core rate of inflation may have a larger impact on the dollar as Fed sees the oil decline as transitory.
  • Given string of lower highs & lows this week, dismal CPI print may spur a more meaningful move at 11,567 (38.2% retracement).

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ReleaseGMTExpectedActual
Empire Manufacturing (JAN)13:305.009.95
Producer Price Index (MoM) (DEC)13:30-0.4%-0.3%
Producer Price Index (YoY) (DEC)13:300.1%0.3%
Producer Price Index ex Food, Energy (MoM) (DEC)13:300.0%0.1%
Producer Price Index ex Food, Energy (YoY) (DEC)13:301.0%1.1%
Producer Price Index ex Food, Energy, Trade (MoM) (DEC)13:301.9%2.1%
Producer Price Index ex Food, Energy, Trade (YoY) (DEC)13:30--1.3%
Initial Jobless Claims (JAN 10)13:30290K316K
Continuing Claims (JAN 3)13:302400K2424K
Philadelphia Fed Business Outlook (JAN)15:0018.76.3

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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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