EUR/USD Continues to Carve Lower-Highs Ahead of Euro-Zone 3Q GDP

Talking Points:

- EUR/USD Outlook Mired by Weakening Outlook for Growth; 3Q GDP to Expand 0.1%.

- USD/CAD Dip Below 1.1300 Quickly Fizzles as Canada Housing Starts Disappoint.

- USDOLLAR Holds Above 23.6% Fib Retracement Ahead of Fed Rhetoric.

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EUR/USD

Chart - Created Using FXCM Marketscope 2.0

• With the ongoing series of lower-highs in EUR/USD, downside targets remain favorable ahead of the Euro-Zone’s advance 3Q Gross Domestic Product (GDP) report, with the next region of interesting coming in around 1.2285 (100% expansion).
• Lack of momentum to close above 1.2480 (23.6% retracement) may highlight a near-term topping processespecially as the Relative Strength Index (RSI) retains the bearish momentum.
• Seeing increased volatility in the DailyFX Speculative Sentiment Index (SSI) as the retail-crowd turns bullish EUR/USD, with the ratio currently standing at +1.03.

USD/CAD

• USD/CAD pares losses as Canada Housing Starts unexpectedly slip to an annualized 183.6K in October; close above 1.1310 (38.2% retracement) may highlight a near-term bottoming process as the pair continues to carve higher highs & lows.
• Despite the strong Canada Employment print, seems as though the Bank of Canada (BoC) is in no rush to further normalize monetary policy as Governor Stephen Poloz largely retains a neutral tone for monetary policy.
• Interest rate expectations also favor a bullish outlook for USD/CAD as market participants are pricing zero rate hikes from the BoC over the next 12-months.

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Read More:

Price & Time: More Room to Run in USD Correction?

GBP/USD to Face Further Losses on Dovish BoE Inflation Report

USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• Dow Jones-FXCM U.S. Dollar Index may stay capped around 11,312 (78.6% retracement) to 11,315 (78.6% expansion) with a slew of Fed officials scheduled to speak later this week (Eric Rosengren, Charles Plosser, Narayana Kocherlakota, Janet Yellen, Stanley Fischer, James Bullard, Jerome Powell and Charles Evans).
• Beyond the Fed rhetoric, the economic releases coming out of the U.S. economy may heighten the bullish sentiment surrounding the greenback as market participants look for a rebound in Advance Retail Sales, while the U. of Michigan Confidence survey is projected to uptick for the fourth consecutive month.
• Nevertheless, the string of higher-lows may ultimately lead to a more meaningful run at 11,312 (78.6% retracement) to 11,315 (78.6% expansion) especially if we see a growing number of Fed officials show a greater willingness to normalize monetary policy sooner rather than later.

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--- Written by David Song, Currency Analyst

To contact David, e-mail [email protected]. Follow me on Twitter at @DavidJSong.

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