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Retail FX Remains Short EUR/USD Ahead of ECB- GBP/USD Eyes June Low

Retail FX Remains Short EUR/USD Ahead of ECB- GBP/USD Eyes June Low

David Song, Strategist

Talking Points:

- EUR/USD Retail Crowd Remains Net-Short Ahead of ECB Meeting.

- GBP/USD Searches for Support Ahead of BoE Rate Decision.

- USDOLLAR Approaches Key Resistance Despite Disappointing ADP Employment Report.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though the long-term outlook for EUR/USD remains bearish, need a break of the near-term upward trends in price & the Relative Strength Index (RSI) along with a close below soft support around 1.1150 (61.8% retracement)to favor a further decline.
  • The European Central Bank (ECB) is widely expected to retain its current policy in September, but a downward revision in the economic forecast paired with a more dovish outlook for monetary policy may trigger a near-term selloff in the single currency should the Governing Council show a greater willingness to expand/extend its quantitative easing (QE) program.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long EUR/USD since March 9, but the ratio remains off of recent extremes as it holds at -1.46 with 41% of traders long.

GBP/USD

GBP/USD Daily Chart
  • GBP/USD may continue to give back the rebound from June (1.5669) as it fails to hold the July low (1.5329) and marks a closing below 1.5330 (78.6% retracement); will look for the RSI to dip into oversold territory for confirmation.
  • Nevertheless, fresh comments coming out of the Bank of England (BoE) September 10 interest rate decision may prop up GBP/USD in the week ahead should we see a growing dissent within the Monetary Policy Committee (MPC) following the 8-1 split during the previous meeting.
  • Break/close below 1.5250 (100% expansion) to expose 1.5669 (June low ) to 1.5180 (23.6% retracement).

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Read More:

Price & Time: USD/CAD Symmetry Awaits

AUDNZD: Rinse & Repeat- Reversal Scalp Back in Play Ahead of GDP

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12034.9012047.1712019.780.1744.71%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar continues to work its way towards 12,049 (78.6%) despite the ongoing mixed batch of data coming out of the economy; will keep a close eye on market expectations for the Non-Farm Payrolls (NFP) report as the ADP figures disappoint.
  • With the ISM Non-Manufacturing survey on tap, will dig into the employment component to better-gauge expectations for job growth; seeing bets that the NFP report may be the deciding factor a Fed September rate hike.
  • With the previous failed attempts in June, July and August, still waiting for a close above 12,049 (78.6% retracement) to open up the next topside objective at 12,082 (61.8% 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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