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EUR/USD Rebound to Face ECB- GBP/USD Breaks Out Ahead of BoE

EUR/USD Rebound to Face ECB- GBP/USD Breaks Out Ahead of BoE

David Song, Strategist

Talking Points:

- EUR/USD Rebound Gathers Pace Ahead of European Central Bank (ECB) Meeting.

- GBP/USD Breaks Out of Bearish Formation- Bank of England (BoE) to Retain Current Policy.

- USDOLLAR Hit by Dovish Fed Commentary; ISM Non-Manufacturing & ADP Employment in Focus.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD breaks out of narrow range & threatens former support zones around 1.1120 (61.8% retracement) amid the larger-than-expected pickup in the Euro-Zone’s Consumer Price Index (CPI) paired with growing expectations for a Greek deal.
  • May see the European Central Bank (ECB) sound increasingly upbeat amid the positive developments, but President Mario Draghi may continue to strike a dovish outlook for monetary policy as the central bank head pledges to carry out the quantitative easing (QE) program until at least September 2016.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, with the ratio currently working its way back towards extremes as it slips to -1.93.

GBP/USD

GBP/USD Daily Chart
  • Ongoing closes above 1.5180 (23.6% retracement) to 1.5190 (50% retracement) may highlight a near-term bottom in GBP/USD as price & RSI threaten the bearish formations carried over from May.
  • Even though the Bank of England (BoE) is widely expected to retain its current policy in June, may see a growing dissent within the Monetary Policy Committee (MPC) as the recent data prints coming out of the U.K. economy highlight a stronger recovery.
  • Break/close above 1.5330 (38.2% retracement) to 1.5350 (50% retracement) to open up the net topside target around 1.5420 (78.6% expansion).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11921.5112036.5411914.22-0.92180.33%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar at risk for a further decline as it struggles to retain the bullish formation carried over from the previous month; may highlight a failed run at 12,049 (78.6% retracement).
  • The ongoing series of weaker-than-expected data prints paired with the appreciation in the greenback raises the risk for a further delay in the normalization cycle as Fed Governor Lael Brainard argues that liftoff is not imminent and favors a wait-and-see approach.
  • Failure to retain the series of higher-lows brings the downside targets into focus, with a break/close below 11,898 (50% retracement) to 11,901 (78.6% expansion) raising the risk for a move back towards 11,826 (61.8% expansion) to 11,843 (38.2 retracement).

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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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