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EUR/USD Retail FX Cling to Net-Short Positions Ahead of ECB Meeting

EUR/USD Retail FX Cling to Net-Short Positions Ahead of ECB Meeting

2016-04-20 15:38:00
David Song, Currency Strategist
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Talking Points:

- EUR/USD Retail FX Cling to Net-Short Positions Ahead of ECB Meeting.

- USDOLLAR Downside Targets Remain on Radar; Bearish Momentum Getting Exhausted?

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EUR/USD

EUR/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD may largely consolidate going into the European Central Bank (ECB) interest rate decision as market participants gauge the outlook for monetary policy; despite speculation for more easing, the single-currency may largely preserve the gains from earlier this year as the euro-area returns to its historic current account surplus following the ‘Great Recession.’
  • Even though ECB President Mario Draghi keeps the door open to further support the monetary union, a batch of dovish rhetoric may not be enough to weaken the single-currency after the central bank head unintentionally put a floor on interest rates following the March 10 meeting.
  • Will continue to watch the topside targets for EUR/USD as the pair appears to be in a long-term bottoming process, with a break/close above 1.1420 (23.6% retracement) to 1.1460 (78.6% retracement) raising the risk for a run at 1.1713 (August high).
EUR/USD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short EUR/USD since the ECB’s last meeting on March 10, with the ratio hitting an extreme earlier this month as it slipped to -2.50.
  • The ratio currently stands at -1.89 as 35% of traders are currently long, with short positions advancing 12.6% from the previous week, while open interest stands 4.4% 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

11807.87

11813.86

11787.08

0.08

46.83%

EUR/USD Retail FX Cling to Net-Short Positions Ahead of ECB MeetingUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the limited market reaction to the better-than-expected Existing Home Sales report, the broader outlook for the USDOLLAR remains tilted to the downside as price & the Relative Strength Index (RSI) preserve the bearish trends from earlier this year.
  • With market participants largely anticipating the Federal Open Market Committee (FOMC) to endorse a wait-and-see approach at the April 27 interest-rate decision, the greenback stands at risk of facing further losses over the coming days as the recent batch of mixed data prints drag on interest-rate expectations.
  • The next downside region of interest comes in around 11,745 (50% retracement) to 11,759 (23.6% retracement), but the failure to resume the recent series of lower highs & lows may highlight a near-term exhaustion in the bearish momentum especially as the RSI continues to hold above 30.
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Read More:

US DOLLAR Technical Analysis: Retesting 2016 Lows

EUR/JPY Technical Analysis: The Negative Rate Trend Line is Back

EUR/USD and USD/CHF Outside Weeks at Well-Defined Levels

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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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