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EUR/USD Outlook Remains Mired by Bearish Trend, Dovish ECB

EUR/USD Outlook Remains Mired by Bearish Trend, Dovish ECB

Talking Points:

- EUR/USD Preserves Bearish Formation Ahead of European Central Bank (ECB) Meeting.

- GBP/USD Range Remains in Play Ahead of Bank of England (BoE) Rate Decision, Inflation Report.

- USDOLLAR Slips to Fresh Weekly Low as Weak Wage Growth Drags on NFP, Fed Expectations.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD remains at risk of facing a further decline in August as price & RSI retain the downward trend; may see a more meaningful run at the 1.0790 (50% expansion) to 1.0800 (23.6% expansion) region as long as the bearish structures remain in play.
  • The European Central Bank (ECB) is widely expected to retain its pledge to ‘fully implement’ its quantitative easing (QE) program, but may need a greater willingness to implement more non-standard measures to see a threat of the wedge/triangle formation from earlier this year.
  • Nevertheless, the DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, with the ratio slipping to -1.99 as 33% of traders are now long.

GBP/USD

GBP/USD Daily Chart
  • Ongoing failed attempts to close above near-term resistance around 1.5630 (38.2% retracement) to 1.5650 (38.2% expansion) may continue to generate range-bound prices for GBP/USD.
  • With the Bank of England (BoE) releasing its interest rate decision, the vote count along with the quarterly inflation report next week, a greater dissent within the committee may heighten the appeal of the British Pound as Governor Mark Carney continues to prepare U.K. households and business for lower borrowing-costs.
  • Will keep a close eye around 1.5450 (61.8% retracement) to 1.5460 (23.6% expansion) for near-term support, with the key downside area of interest coming in around 1.5330 (78.6% expansion) to 1.5350 (50% retracement).

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Read More:

Euro "Stutter Step"?

The Weekly Volume Report: USD/CAD Turnover Supports Broader Trend

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11997.7812052.0311965.51-0.31167.11%

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar slips to a fresh weekly low following the marked slowdown in the U.S. Employment Cost Index, and the greenback remains at risk of facing additional headwinds over the near to medium-term as the ongoing mixed batch of data drags on interest rate expectations.
  • Currently seeing market forecasts for another +225K expansion in U.S. Non-Farm Payrolls (NFP), but will keep a close eye on the Labor Participation Rate along with the wage growth figures as the Federal Reserve looks for a further implement in employment before removing the zero-interest rate policy.
  • Break/close below the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) may open up former resistance around 11,898 (50% retracement) to 11,901 (78.6% 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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