Talking Points:
- Retail FX Remains Net-Long EUR/USD Despite Dovish ECB Rhetoric.
- USD/CAD November Opening Monthly Low at Risk on Strong Canada Employment Report.
- USDOLLAR Tests October High (12,110) Ahead of U.S. Non-Farm Payrolls (NFP).
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Chart - Created Using FXCM Marketscope 2.0
- Will continue to watch the downside risk for EUR/USD amid the recent series of lower highs & lows in the exchange rate, while the European Central Bank (ECB) pledges to further embark on its easing cycle; will keep a close eye on the July low (1.0807) as it lines up with the Fibonacci overlap around 1.0790 (50% expansion) to 1.0800 (23.6% expansion).
- The bearish tilt in the Relative Strength Index (RSI) casts a long-term bearish outlook for EUR/USD especially as the pair fails to preserve the upward trend from earlier this year, but need the oscillator to push into oversold territory to favor a further decline in the days ahead.
- Even though the euro-dollar extends the decline from the previous month, the DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long EUR/USD since November 3, while the ratio climbs to new extremes as it advances to +1.48, with 60% of traders long.
USD/CAD
- With Canada Employment projected to increase another 10.0K in October, signs of stronger job growth may boost the appeal of the Canadian dollar and limit the topside risk for USD/CAD especially as the RSI largely preserves the bearish formation from back in July.
- Data prints highlighting a stronger recovery may keep the Bank of Canada (BoC) on the sidelines at the December 2 policy meeting, but Governor Stephen Poloz may keep the door open to further embark on the easing cycle as the central bank tries to encourage a ‘soft-landing’ in the housing market.
- As USD/CAD preserves the long-term uptrend, topside targets remain on the radar, with near-term resistance coming in around 1.3280 (78.6% expansion) to 1.3320 (38.2% expansion).
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12114.94 | 12116.1 | 12077.86 | 0.26 | 75.51% |
Chart - Created Using FXCM Marketscope 2.0
- Dow Jones-FXCM U.S. Dollar threatens the October high (12,110) ahead of the highly anticipated Non-Farm Payrolls (NFP) report as Fed officials continue to keep a December liftoff on the table; will keep a close eye on the RSI as it comes up against trendline resistance.
- Beyond the headline reading for job growth, will keep a close eye on the Labor Force Participation Rate as it sits at the lowest since 1977, while Average Hourly Earnings are expected to increase an annualized 2.3% following the 2.2% expansion in September.
- Increasing bets for a December Fed rate-hike may spur a further advance in the days ahead, with the focus turning to the April high (12,162) amid the failed run at 12,176 (78.6% expansion) from earlier this year.
--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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