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EUR/USD Retail Sentiment Flips; Dovish ECB Rhetoric to Fuel Losses

EUR/USD Retail Sentiment Flips; Dovish ECB Rhetoric to Fuel Losses

2016-06-27 16:45:00
David Song, Strategist
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Talking Points:

- EUR/USD Retail Sentiment Flips; Dovish ECB Rhetoric to Fuel Losses.

- USDOLLAR Climbs to Fresh Monthly High Even as Fed Expectations Falter.

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

  • With the U.K. voting to leave the European Union, EUR/USD may continue to give back the advance from the end of 2016 amid the growing threat for contagion; failure to preserve the upward trend from December may fuel speculation for a head-and-shoulders top especially as the bearish formation in the Relative Strength Index (RSI) continues to take shape.
  • With European Central Bank (ECB) officials on the wires this week, a wave of dovish rhetoric may dampen the appeal of the single-currency should Governing Council officials show a greater willingness to further insulate the monetary union with more non-standard measures.
  • A closing price below the Fibonacci overlap around 1.0960 (23.6% retracement) to 1.0970 (38.2% retracement) may open up the downside targets, with a break below 1.0910 (38.2% expansion) raising the risk of a move back towards 1.0850 (78.6% expansion).
DailyFX SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail crowd flipped net-long EUR/USD coming into the last week of June, with the ratio hitting a near-term extreme at the end of May as it climbed above the +1.00 mark.
  • The ratio currently sits at +1.05 as 51% of traders are long, with short positions 35.5% lower from the previous week as open interest stands 32.0% 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

12028.57

12049.47

11962.05

0.94

117.97%

EUR/USD Retail Sentiment Flips; Dovish ECB Rhetoric to Fuel LossesUSDOLLAR Daily Chart

Chart - Created by David Song

  • The USDOLLAR looks poised to extend the advance following the U.K. Referendum as it shows a greater attempt to break out of the downward trend from earlier this year, while the ‘flight to quality’ gathers pace; may see choppy/whipsaw-like price action going into the end of month/quarter on the back of position adjustments.
  • Nevertheless, heightening uncertainty clouding the global growth outlook may push the Federal Open Market Committee (FOMC) to further delay its normalization cycle, and the greenback stands at risk of facing near-term headwinds as market participants scale back bets for a rate-hike in 2016.
  • A closing price above the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) may open up the topside targets, with a break of 12,049 (78.6% retracement) to 12,057 (23.6% expansion) raising the risk for a move back towards 12,170 (78.6% retracement) to 12,176 (78.6% expansion).
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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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