EUR/USD Risks Further Losses Ahead of ECB- 1.3500 Remains Key

DailyFX

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EUR/USD Currency

Talking Points:

- USDOLLAR Retains Bearish Structure Despite Upward Revision in 4Q U.S. GDP

- EUR/USD Remains in Correction; Outlook Vulnerable to Dovish ECB

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10519.75

10526.52

10503.98

0.03

59.44%

USDOLLAR Daily

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USDollar Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Failure to Close Above 10,524 to Favor Downside Targets
  • Interim Resistance: 10,602 (38.2 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,470 Pivot

Release

GMT

Expected

Actual

Personal Income (FEB)

12:30

0.3%

0.3%

Personal Spending (FEB)

12:30

0.3%

0.3%

Personal Consumption Expenditure Deflator (MoM) (FEB)

12:30

0.1%

0.1%

Personal Consumption Expenditure Deflator (YoY) (FEB)

12:30

0.9%

0.9%

Personal Consumption Expenditure Core (MoM) (FEB)

12:30

0.1%

0.1%

Personal Consumption Expenditure Core (YoY) (FEB)

12:30

1.1%

1.1%

U. of Michigan Confidence (MAR F)

13:55

80.5

80.0

Fed's Esther George Speaks on U.S. Economy

16:45

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The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) continues to hold above the 10,500 handle going into the end of March, but technical outlook may continue to highlight the risk for a further decline should the greenback mark another failed attempt to close above 10,524, the 23.6 percent Fibonacci retracement from the September 2009 advance.

The limited reaction to the U.S. data prints suggests that the sentiment surrounding the reserve currency remains bearish, and the dollar may continue to carve lower highs & lower lows ahead of the highly anticipated Non-Farm Payrolls (NFP) report as the Federal Reserve pledges to carry its zero-interest rate policy (ZIRP) into 2015.

Indeed, Chicago Fed President Charles Evans argued that the central bank should start raising rates in 2016 amid the ongoing slack in the real economy, and a further deterioration in the interest rate outlook will continue to cast a bearish outlook for the dollar as market participants weigh the outlook for monetary policy.

With that said, we will continue to keep a close eye on the 10,470 pivot, and favor ‘selling bounces’ in the dollar as the

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EUR-USD-Risks-Further-Losses-Ahead-of-ECB-0201_body_ScreenShot006.png, EUR/USD Risks Further Losses Ahead of ECB- 1.3500 Remains Key

EUR/USD Daily

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EUR/USD Daily Chart
  • Continues to Mark Fresh Lows; Bearish RSI Momentum Remains in Focus
  • Interim Resistance: 1.3960-70 (61.8% expansion)
  • Interim Support: 1.3600 Pivot to 1.3620 (23.6 retracement)

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The greenback weakened against two of the four components, led by a 0.17 percent rally in the British Pound, while the Euro bounced back from a fresh monthly low (1.3704) ahead of the European Central Bank (ECB) on tap for April 3.

There’s speculation that the ECB will show a greater willingness to further embark on its easing cycle amid the persistent threat for deflation, and the single currency may face a further decline in the coming days should central bank President Mario Draghi adopt a more dovish tone for monetary policy.

In turn, the next key downside targets for the EUR/USD comes around 1.3650-60, but we will need to see a break and a close below the 1.3500 handle to favor a long-term bearish forecast for the euro-dollar as the pair remains in a correction.

--- 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.

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