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Retail FX Remains Net-Short EUR/USD Ahead of ECB Meeting

Retail FX Remains Net-Short EUR/USD Ahead of ECB Meeting

David Song, Strategist

Talking Points:

- EUR/USD Clears Weekly Opening Range Ahead of European Central Bank (ECB) Meeting.

- USD/CAD Spikes to Fresh Monthly High as Bank of Canada (BoC) Cuts Benchmark Interest Rate.

- Bullish USDOLLAR Sentiment to Benefit on Global Monetary Easing?

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD clears the weekly opening range and rallies to 1.1678 amid headlines the European Central Bank (ECB) will implement a EUR50B/month asset-purchase program, which will start in March.
  • Nevertheless, EUR/USD remains at a risk for further loss as the Relative Strength Index (RSI) holds in oversold territory; need oscillator to move back above 30 to favor a larger rebound.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since January 20, with the ratio currently holding at -1.24, but may see increased volatility in positioning as there appears to be some profit-taking ahead of the ECB meeting.

USD/CAD

USD/CAD Daily Chart
  • USD/CAD rallies to a fresh monthly high of 1.2323 as the Bank of Canada (BoC) unexpectedly cuts the benchmark interest rate to 0.75% from 1.00%.
  • Looks as though BoC Governor Stephen Poloz is keeping the door open for a further reduction in borrowing costs as the central bank still has room to maneuver.
  • AS the RSI continues to push deeper into overbought territory, topside targets remain favored with the next region of interest coming in around 1.2390 (161.8% expansion) to 1.2420 (161.8% expansion).

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Read More:

Price & Time: Kiwi To Fall In Line?

T-Minus 1: Setting EUR Expectations for Tomorrow’s ECB Meeting

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11703.4711709.8111645.63-0.01116.82%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar may consolidate going into the end of the week as it retains the monthly opening range; will keep a close eye on interest rate expectations as the Federal Open Market Committee (FOMC) holds its interest rate decision on January 28.
  • With the 2015 rotation within the FOMC, will play very close attention to the forward-guidance for monetary policy especially as its major counterparts adopt a more dovish tone for monetary policy.
  • With the bullish RSI momentum in play, topside targets remain in focus with the next level of interest around 11,774 (50% expansion).

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ReleaseGMTExpectedActual
MBA Mortgage Approvals (JAN 16)12:00--14.2%
Housing Starts (DEC)13:301040K1089K
Housing Starts (MoM) (DEC)13:301.2%4.4%
Building Permits (DEC)13:301060K1032K
Building Permits (MoM) (DEC)13:300.8%-1.9%

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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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