Talking Points:

- EUR/USD Threatens Bearish RSI Momentum Despite Dovish ECB Draghi.

- GBP/USD Continues to Underperform; U.K. Inflation to Slow Further.

- USDOLLAR Risks Larger Correction on Dismal CPI Report.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though European Central Bank (ECB) President Mario Draghi continues to endorse a dovish tone for monetary policy, EUR/USD may face a larger correction as the Relative Strength Index (RSI) breaks out of the bearish trend.
  • Euro remains at risk of facing additional headwinds especially as Greece struggles to reach an agreement, while policymakers favor a weaker exchange rate.
  • Despite the push higher, DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD, with the ratio sliding to -2.00.

GBP/USD

GBP/USD Daily Chart
  • Despite the bullish RSI momentum, failure to push & close above the 1.5000 handle may continue to produce range-bound prices in GBP/USD.
  • However, a further slowdown in the headline & core U.K. CPI may spark a further decline in the sterling as the Bank of England (BoE) remains in no rush to normalize monetary policy.
  • Will stay flat on GBP/USD amid the string of closing price above 1.4700-10 (78.6% expansion).

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11950.57

12016.04

11939.34

-0.30

91.76%

EUR/USD Clears Bearish RSI Momentum- GBP to Face Slowing UK InflationUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar index remains at risk for a larger pullback as the bearish RSI momentum gathers pace; close below 11,970 (161.8% expansion) to provide conviction/confirmation for a further decline.
  • Will keep a very close eye on the U.S. Consumer Price Index (CPI) as the core rate of inflation is projected to climb an annualized 1.7% in February after expanding 1.6% the month prior; will it boost interest rate expectations?
  • Long-term outlook remains bullish as USDOLLAR retains the upward trending channel carried over from the previous year; will continue to watch 11,894 (61.8% retracement) to 11,901 (78.6% expansion) as near-term support.

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Release

GMT

Expected

Actual

Chicago Fed National Activity Index (FEB)

12:30

0.10

-0.11

Existing Home Sales (FEB)

14:00

4.90M

4.88M

Existing Home Sales (MoM) (FEB)

14:00

1.7%

1.2%

Fed’s Stanley Fischer Speaks on U.S. Economy

16:30

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Fed’s John Williams Speaks on U.S. Economy

1:35

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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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