EUR/USD Threatens 1.20- Downside Targets in Focus on Dovish ECB
Talking Points:
- EUR/USD Fails to Break 1.20 Even as ECB’s Draghi Talks Up Quantitative Easing (QE).
- USD/CAD Breaks Out of Range; RSI Coming Up Against Overbought Territory.
- USDOLLAR Advance Capped by Weaker-than-Expected ISM Manufacturing.
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EUR/USD
Chart - Created Using FXCM Marketscope 2.0
- May only be a matter of time before EUR/USD breaks 1.20 as European Central Bank (ECB) President Mario Draghi sees a risk for deflation; fueling bets for quantitative easing at the January 22 meeting.
- Downside break in Relative Strength Index (RSI) to favor a further decline in EUR/USD, with the next target coming in around 1.1960-70 (78.6% expansion).
- May see stops get triggered on a move below 1.20 as the DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long EUR/USD since December 16, with the ratio currently standing at +1.63.
USD/CAD
- Weak crude oil prices may continue to drive USD/CAD higher as Bank of Canada (BoC) Governor Stephen Poloz remains in no rush to further monetary policy.
- As RSI comes up against overbought territory, a topside push should provide conviction/confirmation for a further advance in dollar-loonie.
- Next topside objective for USD/CAD comes in around 1.1750-60 (100% expansion).
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USDOLLAR(Ticker: USDollar):
|
Index |
Last |
High |
Low |
Daily Change (%) |
Daily Range (% of ATR) |
|
DJ-FXCM Dollar Index |
11617.20 |
11622.67 |
11545.66 |
0.60 |
149.55% |
Chart - Created Using FXCM Marketscope 2.0
- Dow Jones-FXCM U.S. Dollar struggling to hold its ground following the batch of dismal data prints; employment component of ISM Manufacturing may help to boost Non-Farm Payrolls (NFP) forecast as the index advanced to 56.8 from 54.9 in November.
- Nevertheless, long-term outlook for USDOLLAR remains bullish as growing number of Fed officials show a greater willingness to normalize monetary; will have to see how the 2015 rotation will impact interest rate expectations.
- Despite the lack of momentum to clear 11,623 (100% expansion), the RSI may highlight another topside move in USDOLLAR as the oscillator threatens the bearish momentum & looks to push back into overbought territory.
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|
Release |
GMT |
Expected |
Actual |
|
Markit Purchasing Manager Index- Manufacturing (DEC F) |
14:45 |
54.0 |
53.9 |
|
ISM Manufacturing (DEC) |
15:00 |
57.5 |
55.5 |
|
ISM Prices Paid (DEC) |
15:00 |
44.0 |
38.5 |
|
Construction Spending (MoM) (NOV) |
15:00 |
0.4% |
-0.3% |
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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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