EUR/USD Extends Post-ECB Rally; 1.1500 on Tap?

Talking Points:

- EUR/USD Advances for Seventh-Consecutive Day Despite Dovish ECB Rate Decision.

- AUD/USD Mounts Larger Rebound Ahead of RBA Meeting Minutes.

- USDOLLAR Downside Targets in Focus as Bearish Formation Continues to Take Shape.

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EUR/USD

Chart - Created Using FXCM Marketscope 2.0

• EUR/USD extends the advance following the European Central Bank’s (ECB) September 3 interest rate decision even as the Governing Council endorses a dovish outlook for monetary policy; may see the pair continue to retrace the decline from the August high (1.1712) as market participants treat the Euro as a funding-currency.
• With Euro-Zone Industrial Production expected to rebound 0.3% in July, may see EUR/USD continue to carve a string of higher highs & lows, with a break/close above 1.1370 (38.2% retracement) opening up the door for 1.1500 (23.6% retracement).
• DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, and the ratio appears to be approaching recent extremes as it widens to -2.01, with 33% of traders long.

AUD/USD

• With AUD/USD trading back above former-support around 0.7080 (38.2% expansion) to 0.7090 (78.6% retracement), the pair remains at risk for a larger rebound especially if the Relative Strength Index (RSI) fails to retain the bearish pattern carried over from April.
• Even though the Reserve Bank of Australia (RBA) retains the verbal intervention on the local currency, the meeting minutes may increase the appeal of the higher-yielding currency as Governor Glenn Stevens endorses a wait-and-see approach.
• Failure to retain the bearish pattern in price & RSI may bring up the next region of interest around 0.7220 (23.6% expansion) to 0.7240 (100% expansion).

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Read More:

Euro ‘Funding-Currency’ Status at Risk on Hawkish Fed Outlook

The Weekly Volume Report: Sterling Rallies on Strong Turnover

USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• Dow Jones-FXCM U.S. Dollar may continue to lose ground ahead of the Federal Reserve’s September 17 interest rate decision amid the ongoing series of lower highs & lows, with near-term support coming in around 11,951 (38.2% expansion) to 11,965 (23.6% retracement).
• Even though the Fed is widely expected to keep the 2015 liftoff on the table, updated projections pointing to a slower pace of normalization may dampen the appeal of the greenback as it drags on interest rate expectations.
• Failure to find support around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) may open up the next downside region of interest coming in 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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