Talking Points:
- USDOLLAR Rebounds on Sticky Core CPI- Growth Rate Adjustment in Focus.
- EUR/USD Sits at Former Resistance- EU Summit on Tap.
- Canadian Dollar to Face Bank of Canada (BoC), 1Q Gross Domestic Product (GDP) Report.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 11869.95 | 11875.65 | 11774.14 | 0.57 | 143.18% |
Chart - Created Using FXCM Marketscope 2.0
- Dow Jones-FXCM U.S. Dollar advances to a fresh weekly high of 11,875 as the core Consumer Price Index (CPI) unexpectedly holds steady at an annualized 1.8% in April; may raise the argument the Fed will be able to achieve the 2% inflation target over the policy horizon.
- Will keep a close eye on the fresh batch of Fed rhetoric, but the preliminary 1Q Gross Domestic Product (GDP) report may drag on the greenback as it’s expected to show a 0.9% contraction in the growth rate versus an initial forecast for a 0.2% expansion.
- Close above the Fibonacci overlap around 11,826 (61.8% expansion) to 11.843 (38.2% retracement) may generate a run at former support around 11,898 (50% retracement) to 11,901 (78.6% expansion).
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Chart - Created Using FXCM Marketscope 2.0
- EUR/USD remains at a risk for a further decline should we see an ongoing series of closes below 1.1120 (61.8% retracement);break/close below former-resistance around 1.0970 (38.2% expansion) to 1.0990 (50% retracement) to bring up next downside target at 1.0850 (78.6% expansion) to 1.0870 (38.2% expansion).
- Will keep a close eye on the headlines coming out of the EU Summit as Greece struggles to achieve a near-term deal; greater threat for default/contagion to heighten the bearish sentiment surrounding the single-currency.
- DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, with the ratio stand at -1.29 going into the holiday weekend.
- USD/CAD looks poised for a test of former support around 1.2360 (38.2% retracement) to 1.2380 (50% retracement) as the pair breaks out of the near-term range.
- Despite the slowdown in Canada CPI, the pickup in Retail Sales may encourage the Bank of Canada (BoC) to endorse a wait-and-see approach at the May 27 policy meeting; will keep a close eye on the 1Q GDP report amid expectations for a marked slowdown from the last three-months of 2014.
- Long-term outlook remains bullish for USD/CAD, but the topside may stay capped as the triangle/wedge pattern carried over from March remains in play.
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Read More:
USD/CAD, USD/JPY Seen as Most Resilient USD-Pairs
--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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