Talking Points:
- EUR/USD Struggles Ahead of ECB Rhetoric- S&P Calls for Larger & Longer QE Program.
- USD/JPY Range Vulnerable to Slowing China, Waning Market Sentiment.
- USDOLLAR Continues to Coil as ADP Employment Boosts NFP Expectations- Fed on Wires.
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Chart - Created Using FXCM Marketscope 2.0
- EUR/USD struggles to hold its ground ahead of key speeches by the European Central Bank (ECB) officials as Standard & Poor’s (S&P) anticipates the Governing Council to extend its quantitative easing (QE) program until mid-2018, with the non-standard measure increasing the central bank’s balance sheet by EUR 2.4T.
- Despite the dovish tone held by the ECB, may see risk trends continue to drive EUR/USD in October as market participants treat the Euro as a ‘funding-currency;’ may need imminent signs for additional ECB support for the long-term trends to come back into play as the central bank largely endorses a wait-and-see approach.
- DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, but the ratio remains off of recent extremes going into October as it sits at -1.29, with 44% of traders long.
USD/JPY
- With USD/JPY finally posting a closing price below near-term support around 11.90-90 (100% expansion), the pair remains at risk for a further decline in the month ahead especially as the Relative Strength Index (RSI) retains the bearish formation carried over from back in May.
- Even though the Bank of Japan (BoJ) is scheduled to release the Tankan survey, the key prints coming out of China may play a greater role in driving USD/JPY volatility over the next 24-hours of trade as fears surrounding the global economy drags on risk appetite.
- Despite the diverging paths for monetary policy, the BoJ’s wait-and-see approach may open the door for a more meaningful downside correction in the exchange rate amid speculation for additional monetary support at the October 30 interest rate decision.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12073.31 | 12079.96 | 12051.76 | 0.08 | 58.80% |
Chart - Created Using FXCM Marketscope 2.0
- The Dow Jones-FXCM U.S. Dollar may coil for a move higher as the 200K expansion in ADP Employment boosts expectations for an upbeat Non-Farm Payrolls (NFP) report; waiting for a break of the bearish RSI momentum for conviction/confirmation for a further appreciation in the greenback.
- With Chair Janet Yellen, St Louis Fed President James Bullard and Governor Lael Brainard on tap later today, comments highlight a greater willingness for a 2015 liftoff may heighten the appeal of the greenback as it boosts interest rate expectations.
- Need a close above 12,082 (61.8% expansion) to favor a move into 12,162 (April high) to 12,176 (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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