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  • BoC Governor Macklem: - Rise in Canadian Dollar does pose some risk - We don't target the Canadian Dollar - Most appreciation in Canadian Dollar is coming from broad-based depreciation of US Dollar #BoC $CAD
  • BoC Governor Macklem - Micro-cut is one option available to the BoC - If we see further appreciation of CAD that will become more of a headwind and that presents downward risk to our projections $CAD
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  • BoC Governor Macklem: - Adjustment of QE purchases will be "a gradual process," not "a switch" - QE programs will be needed for some time #BoC $CAD
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  • BoC Governor Macklem: - BoC has options if economy proves weaker than expected - BoC spent a good bit of time discussing stimulus amount #BoC $CAD
  • BoC Governor Macklem - It is too early to consider slowing the pace of QE purchases
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EUR/USD Bid Ahead of ECB Meeting; Topside Targets in Focus

EUR/USD Bid Ahead of ECB Meeting; Topside Targets in Focus

David Song, Strategist

Talking Points:

- EUR/USD Bid Ahead of ECB Meeting; Topside Targets Favored on Wait-and-See Approach.

- USDOLLAR Weakness to Persist on Mixed Data, Slowing ISM Manufacturing.

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the "Traits of Successful Traders" series.

EUR/USD

EUR/USD Daily Chart

Chart - Created by David Song

  • Even though the European Central Bank (ECB) keeps the door open to further embark on its easing cycle, more of the same from President Mario Draghi and Co. may fuel a larger advance in EUR/USD as the pair breaks out of the descending channel formation from early May and appears to have carved a near-term bottom around 1.1090 (50% retracement) to 1.1110 (50% retracement).
  • Beyond the details surrounding the ECB’s corporate-bond purchases and the Targeted Long-Term Refinance Operation (T-LTRO), the Governing Council may largely endorse a wait-and-see approach as the non-standard measures work their way through the real economy; may see the single-currency outperform on the back of the weakening outlook for the global economy as the euro-area returns to its historical role as a net-creditor to the rest of the world.
  • As EUR/USD preserves the upward trend carried over from December, the first topside region of interest comes in around 1.1210 (61.8% retracement) to 1.1230 (38.2% retracement), followed by 1.1270 (38.2% retracement) to 1.1290 (23.6% retracement).
EUR/USD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd has flipped net-short EUR/USD ahead of the ECB interest-rate decision, with the ratio hitting an extreme back in May as it slipped to -2.50.
  • The ratio currently sits at -1.00 as 50% of traders are long, with short positions 6.9% higher from the previous week even as open interest stands 1.5% below 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):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

US Dollar Index

11969.79

11999.25

11953.46

-0.21

118.74%

EUR/USD Bid Ahead of ECB Meeting; Topside Targets in FocusEUR/USD Daily Chart

Chart - Created by David Song

  • The USDOLLAR pares overnight losses as the ISM Manufacturing survey beats market expectation in May, with the greenback at risk for a further advance as it breaks out of the bearish trend from earlier this year and consolidates above the Fibonacci overlap 11,951 (38.2% expansion) to 11,965 (23.6% retracement).
  • Nevertheless, the ISM survey may do little to boost expectations for a strong Non-Farm Payrolls (NFP) report as the employment component contracts for the sixth consecutive month; will keep a close eye on ADP Employment report as private payrolls are projected to increase 174K in May.
  • Nevertheless, the USDOLLAR stands at risk for a larger recovery with the next topside hurdle coming in around 12,049 (78.6% retracement) to 12,057 (23.6% expansion).
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Read More:

US DOLLAR Technical Analysis: Another Monthly Opening Range Worth Watching

Gold Prices in Free Fall- Shorts at Risk into NFP

EUR/GBP Breakdown Eyes Critical Support at 7520

GBP/USD Successful Re-Test of Former Resistance Line

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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