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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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).
- 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% |
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
Big Test For Spoos, Big Test For the Markets
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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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