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EUR/USD Extends Rebound from 1.0800 Support- Retail FX Remains Short

EUR/USD Extends Rebound from 1.0800 Support- Retail FX Remains Short

David Song, Strategist

Talking Points:

- EUR/USD Retail FX Crowd Remains Net-Short Despite Fresh Weekly Highs.

- USD/CAD Unfazed by Upbeat Canada Retail Sales- RSI Trigger in Focus.

- USDOLLAR Continues to Carve Lower Highs & Lows Despite Upbeat Data.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • After failing to break near-term support around 1.0790 (50% expansion) to 1.0800 (23.6% expansion), EUR/USD may face a larger rebound especially if the Relative Strength Index (RSI) fails to preserve the bearish momentum carried over from the previous month.
  • However, the Euro-Zone Purchasing Manager Indices (PMI) may produce near-term headwinds for the single currency should the data prints highlight a slowing recovery & fuel speculation for a further expansion of the European Central Bank’s (ECB) easing cycle.
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, with the ratio approaching extremes as it slips to -1.59, with 39% of traders long.

USD/CAD

USD/CAD Daily Chart
  • Long-term outlook for USD/CAD remains bullish amid the deviation in the policy outlook, but the pair may face a near-term pullback should the RSI highlight a sell-signal, with the oscillator falling back below 70.
  • Despite the better-than-expected Canada Retail Sales report, the dovish tone laid out by Bank of Canada (BoC) Governor Stephen Poloz may continue to dampen the appeal of the loonie amid growing speculation for a further reduction in the benchmark interest rate.
  • Topside targets will remain favored as long as the oscillator holds in overbought territory, with 1.3064 (2009 high) to 1.3080 (61.8% expansion) largely in focus, but a break below 1.2940 (78.6% retracement) may spur a larger pullback into former resistance around 1.2800 (38.2% expansion).

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Read More:

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GBPJPY Defends Monthly Open- Weekly Range Break to Validate Long Bias

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12015.3712026.8311977.70.0494.04%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar bounces back from a fresh weekly low (11,977), but the ongoing string of lower highs & lows raises the risk for a larger correction following the failed attempts to close above 12,049 (78.6% retracement).
  • Nevertheless, a further pickup in U.S. New Home Sales may fuel expectations for a Fed September liftoff as Chair Janet Yellen remains upbeat on the economy & sees scope for a 2015 rate hike.
  • In light of the lower highs & lows, will keep a close eye on the 11,898 (50% retracement) to 11,901 (78.6% expansion) region for interim support.

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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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