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EUR/USD Risks Larger Rebound Despite Dovish ECB Minutes

EUR/USD Risks Larger Rebound Despite Dovish ECB Minutes

David Song, Strategist

Talking Points:

- EUR/USD Mounts Larger Rebound Despite Dovish ECB; Retail FX Flips Net-Short.

- USD/CAD Pullback May Be Short-Lived on Slowing Canada Consumer Price Index (CPI), Retail Sales.

- USDOLLAR Risks Larger Correction as FOMC Minutes Point to Three-Way Split.

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though the European Central Bank (ECB) Minutes highlight a further willingness to further embark on the easing cycle, the near-term rebound in EUR/USD may gather pace over the coming days as the Relative Strength Index (RSI) fails to break 30 and push into oversold territory.
  • With a slew of ECB officials scheduled to speak over the next 24-hours, will keep a close eye on the fresh batch of central bank rhetoric as the Governing Council adopts a more cautious outlook and sees weak energy prices having a ‘significant’ impact on core inflation.
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd flipped net-short EUR/USD earlier this morning, with the ratio slipping to -1.03 as 49% of traders are now long.

USD/CAD

USD/CAD Daily Chart
  • Even though the long-term outlook for USD/CAD remains bullish, the pair may consolidate over the remainder of the month amid the failed attempt to test the October high (1.3456), while RSI largely preserves the bearish formation carried over from back in July.
  • A marked slowdown in Canada’s Core Consumer Price Index (CPI) accompanied by a dismal Retail Sales report may dampen the appeal of the loonie and spur a test of the monthly high (1.3370) as the Bank of Canada (BoC) retains a cautious outlook for the region.
  • May see USD/CAD face range-bound prices as it continues to close above 1.3210 (78.6% expansion), but positive data prints out of Canada may spur a downside break into 1.3140 (23.6% retracement).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12129.1212177.0312108.72-0.44146.02%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USDOLLAR stand at risk for a larger correction as the Federal Open Market Committee (FOMC) Minutes suggest that the central bank still lacks a majority vote for a December rate-hike, with signs of a three-way split as some officials look to further delay the normalization cycle.
  • Even though the economic docket remains fairly light over the remainder of the week, will keep a close eye on speeches from Fed Vice-Chair Stanley Fischer, St. Louis Fed President James Bullard and New York Fed President William Dudley may spur increased volatility in the greenback as market participants weigh the outlook for a 2015 liftoff.
  • Will retain a constructive outlook for the USDOLLAR amid the bullish formations in price and RSI, and will watch former-resistance around 12,049 (78.6% retracement) to 12,082 (61.8% expansion) for new support.

Read More:

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WTI Crude Oil Price Forecast: What Now That $40bbl Broke?

EUR/JPY on the Cusp of Important Move

US DOLLAR Technical Analysis: Set To Hold Key Support

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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