EUR/USD Retail Sentiment Flips; Dovish ECB Rhetoric to Fuel Losses
- EUR/USD Retail Sentiment Flips; Dovish ECB Rhetoric to Fuel Losses.
- USDOLLAR Climbs to Fresh Monthly High Even as Fed Expectations Falter.
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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).
- 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.
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|Index||Last||High||Low||Daily Change (%)||Daily Range (% of ATR)|
|US Dollar Index||12028.57||12049.47||11962.05||0.94||117.97%|
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
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.