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Retail FX Fades EUR/USD Resilience as Pair Probes 1.1200 Resistance

Retail FX Fades EUR/USD Resilience as Pair Probes 1.1200 Resistance

David Song, Strategist

Talking Points:

- EUR/USD Resilience Continues- Retail FX Shorts Jump 17%.

- USD/CAD Holds Range Ahead of Canada Consumer Price Index (CPI), Retail Sales.

- USDOLLAR Struggles to Hold Support Post-FOMC Minutes- Downside Targets in Focus.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the long-term bearish outlook for EUR/USD, the pair may continue to retrace the decline from June as the bullish momentum in the Relative Strength Index (RSI) gathers pace, with a break/close above 1.1180 (23.6% expansion) to 1.1210 (61.8% retracement) likely to expose the 1.1300 handle (78.6% retracement).
  • With the Euro-Zone Purchasing Manager Indices (PMI) a slower rate of expansion, may see the European Central Bank (ECB) sound more dovish at the September 3 policy meeting especially as concerns surrounding China dampens the outlook for global growth.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, but the ratio appears to be working its way back towards recent extremes as it slips to -2.35 on the back of a 17.4% rise in short positions.

USD/CAD

USD/CAD Daily Chart
  • USD/CAD appears to have marked a failed run at near-term resistance around 1.3210 (78.6% expansion): failure to preserve the bullish RSI momentum raises the risk for a larger correction in the exchange rate.
  • Beyond forecasts for another 0.2% expansion in Canada Retail Sales, a pickup in the headline & core Consumer Price Index (CPI) may heighten the appeal of the loonie as it limits the Bank of Canada’s (BoC) scope to implement additional monetary support.
  • Break of near-term support around 1.2930 (61.8% expansion) to 1.2960 (23.6% retracement) may spur a move back towards former-resistance around 1.2800 (38.2% expansion).

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Read More:

US Dollar Tumbles, Sees Significant Volatility on Leaked FOMC Minutes

EURUSD Surges to Fresh Weekly High on FOMC Leak- Long Scalps Favored

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12000.5312005.8911979.28-0.0152.23%
USDOLLAR Daily Charts

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar facings growing risk for a further decline following the Federal Open Market Committee (FOMC) Minutes as it breaks below near-term support around 11,951 (38.2% expansion) to 11,965 (23.6% retracement).
  • Despite the unexpected 2.0% rise in U.S. Existing Home Sales, seems as though the bar remains high for a September liftoff as the ongoing batch of mixed data prints may fail to insulate the world’s largest economy from global shocks.
  • Will continue to watch 12,049 (78.6% retracement) as the USDOLLAR continues to come off of near-term support around 11,951 (38.2% expansion) to 11,965 (23.6% 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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