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EUR/USD Monthly Open Range in Focus Following ECB Rhetoric

EUR/USD Monthly Open Range in Focus Following ECB Rhetoric

David Song, Strategist

Talking Points:

- EUR/USD Preserves Long-Term RSI Formation Even as ECB Endorses Dovish Outlook.

- NZD/USD Fails to Retain Monthly-Opening Range Ahead of New Zealand Trade Report.

- USDOLLAR Clears Topside Targets & Eyes September High Ahead of Durable Goods Orders.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the recent string of lower highs & lows in EUR/USD, the pair may face a larger rebound as it preserves the monthly-opening range, while the Relative Strength Index (RSI) retains the bullish pattern carried over from back in March.
  • Even though the European Central Bank (ECB) keeps the door open to increase the scope and duration of its quantitative easing (QE) program, recent comments from ECB President Mario Draghi suggests that the committee remains in no rush to further embark on its easing cycle as they continue to assess the outlook to achieve its one and only mandate for price stability.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, but the ratio remains off of recent extremes as it sits at -1.17, with 46% of traders long.

NZD/USD

NZD/USD Daily Chart
  • With NZD/USD slipping to a fresh monthly low (0.6236), widening trade deficit in New Zealand may spur a further decline in the exchange rate as the weakening outlook for growth puts increased pressure on the Reserve Bank of New Zealand (RBNZ) to further reduce the cash rate.
  • Risks for a lower borrowing-costs continues to favor a bearish outlook for the kiwi, but the failure to mark fresh monthly lows may continue to produce range-bound prices in NZD/USD as Governor Graeme Wheeler softens the verbal invention on the local currency.
  • Waiting for a break of the bullish RSI formation to favor a resumption of the long-term bearish trend, with the next downside region of interest coming in around 0.6210 (161.8% expansion) and 0.6160 (161.8% expansion).

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Read More:

USDOLLAR Rallies from 200 Day Average

Macro Musings: Who Thought The Fed Would Raise Rates in 2015?

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12033.6812041.5811980.760.34118.92%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • With the ongoing series of higher highs & lows in the Dow Jones-FXCM U.S. Dollar, the near-term resilience may gather pace in the days ahead as Fed officials continue to talk of a 2015 rate hike, with Atlanta Fed President Dennis Lockhart arguing that the liftoff is ‘very close.’
  • However, a 2.3% contraction in orders for U.S. Durable Goods may dampen the appeal of the greenback as it drags on the outlook for growth and inflation; will keep a close eye on Non-Defense Capital Goods Orders excluding Aircrafts, a proxy for future business investment, amid the shift in Chair Janet Yellen’s outlook for the economy.
  • Close above 12,049 (78.6% retracement) may bring up 12,082 (61.8% expansion) along with the monthly high at 12,095.

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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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