EUR/USD Risks Further Losses as Shift in Retail Positioning Continues
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Talking Points:
- EUR/USD Vulnerable to Further Losses as Shift in Retail Positioning Continues.
- USDOLLAR Extends Advance Following More Fed Rhetoric, Upbeat Consumer Confidence.
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EUR/USD
Chart - Created Using FXCM Marketscope 2.0
EUR/USD stands at risk for further losses as it breaks down from the upward trend carried over from the previous month, with the Relative Strength Index (RSI) highlighting a similar dynamic; may see the euro-dollar continue to give back the rebound from the July low (1.0951) as it carves a near-term series of lower highs & lows following the Fed Economic Symposium in Jackson Hole, Wyoming.
Positive developments out of Germany accompanied by an uptick in the Euro-Zone’s Consumer Price Index (CPI) may spark a bullish reaction in the single-currency, but the market reaction may be short-lived as there appears to be a material shift in positioning going into the end of the month.
Need a break/close below 1.1100 (50% retracement) to favor a test of the key Fibonacci overlap around 1.0950 (23.6% retracement) to 1.0960 (38.2% retracement).
The DailyFX Speculative Sentiment Index (SSI) shows the FX crowd remains net-short EUR/USD since July 27, but the ratio appears to have marked a failed test of the 2016 extreme (-2.67) as it narrows from a recent low of -2.66.
The ratio currently sits at -1.30 as 44% of traders are long, with long positions 44.0% higher from the previous week, while open interest stands 9.9% above the monthly average.
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USDOLLAR(Ticker: USDollar):
Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
DJ-FXCM Dollar Index | 12000.93 | 12005.77 | 11957.38 | 0.32 | 93.06% |
Chart - Created Using FXCM Marketscope 2.0
Fresh rhetoric from Fed Vice-Chair Stanley Fischer accompanied by the better-than-expected U.S. Consumer Confidence survey appear to be giving the USDOLLAR a boost especially as the voting-member argues against a ‘one and done’ approach for normalizing monetary policy; may see the greenback continue to trade on a firmer footing as market participants price a greater probability for a 2016 rate-hike.
With a number of Fed officials still scheduled to speak ahead of the highly anticipated U.S. Non-Farm Payrolls (NFP) report, another batch of hawkish rhetoric may highlight a growing dissent within the Federal Open Market Committee (FOMC) as the U.S. economy approaches ‘full-employment.’
A closing price above 11,989 (50% retracement) may generate a further advance in the USDOLLAR, with the next region of interest coming in around 12,049 (78.6% retracement) to 12,064 (61.8% retracement).
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--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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