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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

Talking Points:

- 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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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):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
US Dollar Index12028.5712049.4711962.050.94117.97%
USDOLLAR 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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Brexit Aftermath Analysis Directory

--- 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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