Talking Points:
- EUR/USD Risks Fresh 2016 High as Retail FX Remains Short, Open Interest Jumps.
- USDOLLAR Bearish Formations Continue to Take Shape; Fed’s William Dudley in Focus.
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Chart - Created Using FXCM Marketscope 2.0
- With EUR/USD climbing to a fresh monthly high of 1.1363, the near-term series of higher highs & lows may spur a further advance in the exchange rate, which may open up the broad range from 2015.
- With the Euro-Zone’s Consumer Price Index (CPI) anticipated to show an uptick in the core rate of inflation, the single-currency may show a bullish reaction to the report as limit’s the European Central Bank’s (ECB) scope to implement more non-standard measures in 2016.
- Will continue to watch the topside targets for EUR/USD as the pair holds above 1.1090 (50% retracement) to 1.1110 (50% retracement), with the next region of interest coming in around 1.1420 (23.6% retracement) to 1.1460 (78.6 retracement).
- The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short EUR/USD since March 10, with the ratio working its way back towards recent extremes as it slipped below -2.00 earlier this month.
- The ratio currently sits at -1.49 as 40% of traders are long, with short positions increasing 15.0% from the previous week, while open interest stands 13.1% above the monthly average.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 11895.73 | 11919.94 | 11867.8 | -0.17 | 82.82% |
Chart - Created Using FXCM Marketscope 2.0
- The near-term series of lower highs & lows accompanied by the bearish formation in the Relative Strength Index (RSI) may lead to a further decline in the USDOLLAR as the dovish comments from Fed Chair Janet Yellen drags on interest-rate expectations.
- Despite the 200K print for ADP Employment, central bank rhetoric may continue to drive market volatility as New York Fed President William Dudley, a permanent voting-member on the Federal Open Market Committee (FOMC) is scheduled to speak ahead of the highly anticipated U.S. Non-Farm Payrolls (NFP) report.
- Downside targets remain in focus for the USDOLLAR with a close below 11,898 (50% retracement) raising the risk for a more meaningful run at 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 dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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