EUR/USD Risks Further Losses as Growth Outlook Deteriorates

Talking Points:

- EUR/USD Risks Fresh Monthly Lows as Growth Outlook Deteriorates

- GBP/USD Holds Above June Low (1.6697) Ahead of BoE Inflation Report

- USDOLLAR Continues to Test Near-Term Resistance; Fed Doves on Tap

EUR/USD:

• EUR/USD extends previous day’s decline as the ZEW Confidence Survey slips to 44.3 from 61.8 in July; marking the second-lowest reading for 2014.
• Remains at risk for a further decline as Euro-Zone 2Q Gross Domestic Product (GDP) report is expected to show a slowdown in growth.
• DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long on EUR/USD, with the ratio standing at +1.94.

GBP/USD:

• Will retain a constructive outlook for GBP/USD as long as it holds above the June low (1.6697); U.K. Jobless Claims projected to contract another 30.0K in July.
• However, subdued wage growth may undermine the near-term outlook for the British Pound as it drags on interest rate expectations.
• Nevertheless, the Bank of England (BoE) Inflation report may have a larger impact on the GBP/USD as market participants look for a rate hike sooner rather than later; need greater willingness from BoE to start normalizing monetary policy in 2014.

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Read More:

Waiting on EUR/USD, USD/CHF Flags to Break

Price & Time: Today’s Close in the Euro Should Prove Important

USDOLLAR Daily

Chart - Created Using FXCM Marketscope 2.0

USDOLLAR(Ticker: USDollar):

• Dow Jones-FXCM U.S. Dollar Index clears near-term resistance around 10,555-561; raises risk for a continuation of fresh monthly highs.
• Bullish momentum in Relative Strength Index (RSI) remains in focus as oscillator tries to push back into overbought territory.
• Next hurdle comes in around 10,590; need a break & close above the key region to see a further retracement of the decline from earlier this year.
• Interim Resistance: 10,590 (50.0% retracement) to 10,604 (38.2% retracement)
• Interim Support: 10,440 (78.6% retracement) to 10,450 Pivot

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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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