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EUR/USD Unfazed by Dovish ECB- Retail FX Remains Net-Short

EUR/USD Unfazed by Dovish ECB- Retail FX Remains Net-Short

David Song, Strategist

Talking Points:

- EUR/USD Retail Crowd Remains Net-Short- ECB Draghi Endorses Dovish Outlook..

- GBP/USD Breakout to Gather Pace on Strong U.K. Consumer Price Index (CPI).

- USDOLLAR Remains at Risk for Narrowing Range Ahead of Fed Meeting.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the dovish forward-guidance laid out by European Central Bank (ECB) President Mario Draghi, may see EUR/USD continue to face range-bound prices over the near-term as EU policy makers pledge to keep Greece within the euro-area.
  • With limited risk of seeing the European Court of Justice strike down on the ECB’s Outright Monetary Transactions (OMT) program, the fundamental data prints coming out of Europe may play a greater role in driving the single-currency as signs of a stronger recovery boosts speculation for a ‘taper-tantrum’.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains heavily net-short EUR/USD, with the ratio approaching extremes as it currently sits at -2.13.

GBP/USD

GBP/USD Daily Chart
  • May see GBP/USD continue to retrace the decline from the previous month as market participants anticipate the headline & core reading for the U.K. Consumer Price Index (CPI) to uptick in May.
  • The British Pound certainly looks more attractive against its other major counterparts as Bank of England (BoE) Governor Mark Carney continues to prepare U.K. households & businesses for higher borrowing costs and sees stronger price growth in the months ahead.
  • Break/close above 1.5550 (61.8% expansion) to 1.5570 (38.2% retracement) would raise the risk of seeing a run at the May high (1.5813).

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Read More:

USD/JPY Risks Larger Pullback on Fed/BoJ Policy Shift

The Weekly Volume Report: USD/JPY Declines, but Volume Steady

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11849.49

11890.22

11849.19

-0.11

56.13%

EUR/USD Unfazed by Dovish ECB- Retail FX Remains Net-ShortUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar may face a tightening range ahead of the Federal Open Market Committee’s (FOMC) June 17 interest rate decision amid the ongoing mixed batch of data prints coming out of the world’s largest economy.
  • The updated Fed forecasts may have the largest impact on the near-term outlook for the greenback, and the dollar remains at risk of facing additional headwinds in the second-half of 2015 should the central bank layout a more shallow path for interest rate expectations.
  • Will continue to watch the Fibonacci overlap around 11,826 (61.8% expansion) to 11,843 (38.2 retracement) for near-term support, with the next downside region of interest coming in around 11,745 (50% retracement) to 11,759 (23.6% retracement).

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EUR/USD Unfazed by Dovish ECB- Retail FX Remains Net-Short

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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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