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Retail FX Remains Net-Short EUR/USD Ahead of Euro-Zone CPI

Retail FX Remains Net-Short EUR/USD Ahead of Euro-Zone CPI

Talking Points:

- Retail FX Remains Net-Short EUR/USD Ahead of Euro-Zone CPI.

- USDOLLAR Struggles Amid Mixed Data; Fed Chair Janet Yellen on Tap.

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EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD stands at risk for a larger advance over the coming days as the pair breaks out of the downward trending channel, and largely retains the advance following the European Central Bank’s (ECB) March 10 interest rate decision.
  • Even though the headline reading for the Euro-Zone’s Consumer Price Index (CPI) is anticipated to highlight negative price growth in March, an uptick in the core rate of inflation may dampen bearish bets for the single-currency as it limit’s the Governing Council’s scope to implement more non-standard measures.
  • Ongoing closes above 1.1090 (50% retracement) to 1.1110 (50% retracement) may spur a move towards 1.1341 (March high) followed by 1.1375 (2016 high).
  • Despite the near-term breakout, the DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short EUR/USD since March 10, with the ratio hitting an extreme following the ECB rate decision as it slipped below -2.00.
  • Will keep a close eye on market participation heading into the end of month/quarter as open interest stands 1.2% above the monthly average, but may see position adjustments produce choppy to whipsaw-like price action as the long-term outlook for EUR/USD remains tilted to the downside amid the diverging paths for monetary policy.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11981.8812030.0411972.29-0.2692.91%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR struggles to hold its ground amid the mixed data prints, with the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, missing market expectations as the figure held steady at an annualized 1.7% in February.
  • May see increased interest surrounding the Non-Farm Payrolls (NFP) report as the U.S. economy approaches ‘full-employment,’ but may see fresh comments from Fed Chair Janet Yellen spark increased volatility in the greenback as market participants weigh the timing of the next rate-hike.
  • Nevertheless, the USDOLLAR appears to have made a failed attempt to push back above 12,050 (78.6% retracement) to 12,082 (61.8% expansion) as it fails to retain the near-term series of higher highs & lows, with a break below 12,050 (78.6% retracement) to 12,082 (61.8% expansion) opening up the door for a move back towards 11,826 (61.8% expansion) to 11,843 (38.2% retracement).

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--- Written by David Song, Currency Analyst

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.