EURUSD Retail FX Remain Net Short Bear Trap or Continuation

(MENAFN- DailyFX) Talking Points:

- Retail FX Crowd Remains Net-Short EUR/USD Post-ECB; Former Resistance in Focus.

- USDOLLAR Carves Bullish Inside-Day; Outlook Mired by Slowing U.S. Retail Sales.

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EUR/USD

Chart - Created Using FXCM Marketscope 2.0

EUR/USD may make a more meaningful run at the February high (1.1375) as the pair breaks out of the range carried over from the previous month while the European Central Bank (ECB) appears to have put a floor on interest rates as President Mario Draghi talks down expectations of lower borrowing-costs. Even though the Governing Council implements more non-standard measures to further support the monetary union the less-dovish forward guidance for monetary policy may open up the highs from back in 2015 amid the failure to close below near-term support around 1.0840 (61.8% retracement) to 1.0850 (78.6% expansion). Will keep a close eye on the Relative Strength Index (RSI) as it appears to be carving a bullish formation with the next topside region of interest coming in around 1.1375 (2016 high) to 1.1420 (23.6% retracement).

Despite the near-term breakout following the ECB meeting the DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-short EUR/USD since March 10 with the ratio hitting an extreme in February as it slipped to -2.00. Nevertheless retail sentiment remains off of near-term extremes as it sits at -1.37 with 42% of traders currently long EUR/USD.

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

12004.58

12012.39

11964.62

0.26

84.53%

Chart - Created Using FXCM Marketscope 2.0

The USDOLLAR appears to carving a bullish inside-day ahead of the Federal Open Market Committee (FOMC) interest rate decision as the central bank is widely expected to maintain an upbeat outlook for the U.S. economy and the greenback may face a larger rebound especially as the RSI appears to be turning around ahead of oversold territory. Nevertheless a 0.2% contraction in U.S. Retail Sales may dampen the appeal of the greenback and drag on interest-rate expectations as it undermines Fed expectations for a ‘consumer’ led recovery in 2016. Ongoing closes above 11951 (38.2% expansion) to 11965 (23.6% retracement) may keep the USDOLLAR support ahead of the FOMC meeting as the central bank is widely expected to further normalize monetary policy throughout the year.

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--- Written by David Song Currency Analyst

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