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EUR/USD Clears 1.1500; Retail FX Crowd Remains Stubbornly Short

EUR/USD Clears 1.1500; Retail FX Crowd Remains Stubbornly Short

David Song, Strategist

Talking Points:

-EUR/USD Clears 1.1500; Retail FX Crowd Remains Stubbornly Short.

- USDOLLAR Downside Targets Remain in View as Search for Support Continues.

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USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • EUR/USD looks poised to extend the rally from the previous week as the pair breaks out of the wedge/triangle formation; will keep a close eye on the Relative Strength Index (RSI) as it approaches overbought territory, with a break above 70 raising the risk for a further advance in the exchange rate.
  • Even though European Central Bank (ECB) President Mario Draghi keeps the door open to further embark on the easing cycle, comments from central bank hawks Sabine Lautenschlager and Jens Weidmann may drag on expectations for more non-standard measures as the Governing Council comes under scrutiny.
  • Break/close above 1.1510 (50% retracement) to 1.1520 (61.8% expansion) may open up the next topside targets around 1.1713 (August 2015 high), followed by 1.1760 (61.8% retracement).
  • The DailyFX Speculative Sentiment Index (SSI) shows retail sentiment is back at extremes as the ratio slipped to -2.50 in April, with the crowd net-short EUR/USD since the ECB’s March 10 meeting.
  • The ratio currently stands at -2.46 as 29% of traders remain long, with short positions 25.9% higher from the previous week, while open interest stands 5.6% above the monthly average.

Why and how do we use the SSI in trading? View our video and download the free indicator here

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11715.5011754.8511714.15-0.2769.14%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the mixed market reaction to the weaker-than-expected ISM Manufacturing survey, the recent series of lower highs & lows in the USDOLLAR raises the risk for a further decline in the index; would like to see the RSI break into oversold territory to favor a further decline amid the failed attempts to break below 30 throughout 2016.
  • Will keep a close eye on U.S. Non-Farm Payrolls (NFP) expectations as the Fed anticipates a further improvement in the labor market, but more of the same from Atlanta Fed President Dennis Lockhart, San Francisco Fed President John Williams, Minneapolis Fed President Neel Kashkari, St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan may drag on the greenback as the central bank remains in no rush to normalize monetary policy.
  • A closing price below 11,745 (50% retracement) may open up the next downside targets coming in around 11,623 (100% expansion) to 11,646 (61.8% retracement).
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Read More:

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US DOLLAR Technical Analysis: Who’s Happier? Bears or Central Bankers

AUD/USD – Will the Real Trend Please Stand Up?

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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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