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EUR/USD Retail Sentiment Remains Skewed Ahead of Fed, ECB Minutes

EUR/USD Retail Sentiment Remains Skewed Ahead of Fed, ECB Minutes

David Song,

Talking Points:

- EUR/USD Retail FX Sentiment Remains Heavily Skewed Ahead of ECB Meeting Minutes.

- USDOLLAR Struggles to Hold Gains Ahead of FOMC Minutes- .

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EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though the European Central Bank’s (ECB) continues to embark on its easing-cycle, EUR/USD may coil for a move higher especially as the Relative Strength Index (RSI) preserves the bullish formation carried over from the previous month.
  • The ECB meeting minutes may fuel speculation for additional monetary support as the Governing Council continues to layout a dovish outlook for monetary policy, the euro-area’s historic current-account surplus may boost the appeal of the single-currency amid the weakening outlook for global growth.
  • With EUR/USD moving back towards the 2016 high (1.1437), a close above 1.1420 (23.6% retracement) to 1.1460 (78.6% retracement) raising the risk of seeing a more meaningful run at the 2015 high (1.1714).
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short EUR/USD since the ECB’s March 10 interest-rate decision, with the ratio holding around the lowest reading since 2015.
  • The ratio currently stands at -2.17 as 32% of traders are long, with long positions 22.3% lower from the previous week, while short positions have increased 12.9% during the same period.

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11889.6311953.8511875.43-0.22127.48%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR struggles to hold its ground ahead of the Federal Open Market Committee (FOMC) meeting minutes, with the greenback at risk for a further decline as central bank officials now forecasting two rate-hikes for 2016.
  • Even though Kansas City Fed President Esther George dissents against the majority, fresh comments from Cleveland Fed President Loretta Mester suggests that the FOMC remains in no rush to normalize monetary policy as the 2016 voting-member sees ‘low-inflation’ this year.
  • Failure to push back above 11,951 (38.2% expansion) to 11,965 (23.6% retracement) may highlight a near-term topping process in the USDOLLAR especially as the RSI preserves the bearish formation from earlier this year, with a break/close below 11,826 (61.8% expansion) to 11,843 (38.2% retracement) raising the risk for a move towards 11,745 (50% retracement) to 11,759 (23.6% retracement).Click Here for the DailyFX Calendar

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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.