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Euro Bearish Outlook Mired by Greek Talks, Sticky CPI

Euro Bearish Outlook Mired by Greek Talks, Sticky CPI

David Song, Strategist

Talking Points:

- EUR/USD Risks Relief Bounce on Greek Deal, Faster Euro-Area Inflation.

- AUD/USD Bearish Pattern Gathers Pace Ahead of RBA Interest Rate Decision.

- USDOLLAR Topside Targets in Focus as ISM Manufacturing Exceeds Market Forecast.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD may face a near-term bounce as Greek pledges to carve out a deal with its creditors, while the Euro-Zone’s Consumer Price Index (CPI) is expected to show an uptick in the headline & core reading for inflation.
  • The failure to retain the bearish formations from the previous month may produce range-bound prices ahead of the European Central Bank (ECB) meeting; need a break/close above 1.1000 (50% retracement) or below 1.0870 (38.2% retracement) to generate a near-term bias for euro-dollar.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, with the ratio currently sitting at -1.62 to start the first full week of June.

AUD/USD

AUD/USD Daily Chart
  • Downside targets remain favored for AUD/USD as the descending channel formation continues to take shape; will keep a close eye on the Relative Strength Index (RSI) as it comes up against oversold territory.
  • Despite expectations of seeing the Reserve Bank of Australia (RBA) keeping the cash rate on hold at 2.00%, may see Governor Glenn Stevens keep the door open to implement lower-borrowing costs along with the verbal intervention on the local currency.
  • With the failed run at the 2015 high (0.8294) will keep a close eye on key support around 0.7570 (50% expansion) to 0.7590 (100% expansion).

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Read More:

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12041.5712043.6111984.460.4392.29%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The bullish sentiment surrounding the Dow Jones-FXCM U.S. Dollar index may gather pace ahead of the Fed’s June 17 meeting amid the ongoing series of higher-lows in the greenback, while the RSI approaches overbought territory.
  • Better-than-expected ISM Manufacturing may fuel expectations of seeing a stronger recovery in the 2Q of 2015; ongoing series of positive U.S. data prints may fuel increased speculation for Fed liftoff in September 2015.
  • Ongoing string of higher-lows in USDOLLAR continues to favor the topside targets, with a break/close above 12,049 (78.6% retracement) exposing 12,082 (61.8% expansion).

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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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