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USDOLLAR Rebound Vulnerable to 1Q GDP Contraction

USDOLLAR Rebound Vulnerable to 1Q GDP Contraction

David Song, Strategist

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%

USDOLLAR Rebound Vulnerable to 1Q GDP ContractionUSDOLLAR Daily Chart

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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USDOLLAR Rebound Vulnerable to 1Q GDP Contraction

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EUR/USD

EUR/USD Daily Chart

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

USD/CAD Daily Chart
  • 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

Crude Nearing Key Pivot

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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