EUR/USD Rebound Fizzles Ahead of 2017-High; Fed Speak, EZ CPI on Tap

Talking Points:

EUR/USD Rebound Fizzles Ahead of 2017-High (1.0829); Fed Rhetoric, EZ CPI on Tap.

USD/JPY Halts Eight-Day Decline; RSI Rebounds Ahead of Oversold Territory.

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EUR/USD Daily Chart

Chart – Created Using Trading View

  • EUR/USD pares a decrease from progressing this week following a batch of better-than-expected information prints entrance out of a euro-area, yet a miss of movement to exam a 2017 high (1.0829) raises a risk for a near-term pullback generally as a U.K. is on march to trigger Article 50 of a Lisbon Treaty subsequent week; might see euro-dollar respond to a downward trend carried over from a prior year, that mostly lines adult with a 200-Day SMA (1.0886).
  • The repercussions from ‘Brexit’ are approaching to benefit increasing courtesy generally as Scotland plans to reason a second referendum, yet a transition might have a singular impact on near-term cost movement as a European Central Bank (ECB) keeps a doorway open to serve support a financial union.
  • With a Euro-Zone Consumer Price Index (CPI) for Mar approaching to prominence a slack in title and core inflation, a Governing Council might uncover a incomparable eagerness to extend a quantitative easing (QE) module over a Dec 2017 deadline as house member Peter Praet warns ‘underlying acceleration trend is still noticeably weak;’ even yet a ECB is scheduled to revoke a asset-purchases to EUR 60B/month, President Mario Draghi may continue to expel a dovish opinion for financial process as ‘headline acceleration had increasing recently, generally overdue to developments in appetite prices.’
  • At a same time, a slew of uninformed speeches entrance out of a Federal Reserve (Chicago Fed President Charles Evans, Dallas Fed President Robert Kaplan, Chair Janet Yellen, Fed Governor Jerome Powell and Minneapolis Fed President Neel Kashkari) might beget singular seductiveness as officials continue to plan a longer-run seductiveness rate tighten to 3.00%, with Fed Funds Futures pricing a incomparable than 90% luck a executive bank will keep a stream process during a subsequent preference on May 3; might see month/quarter-end flows beget choppy cost movement generally as a Federal Open Market Committee (FOMC) appears to be in no rush to tell a $4 trillion change sheet.
  • With that said, a mangle of a 1.0660 (50% expansion) to 1.0680 (78.6% expansion) jump following a Federal Open Market Committee’s (FOMC) Mar rate-hike keeps a near-term disposition slanted to a topside for EUR/USD, with a mangle of a 2017-high (1.0829) lifting a risk for a run during a Dec high (1.0873); however, disaster to reason above a Fibonacci overlie might criticise a near-term miscarry in a sell rate, with a subsequent downside segment of seductiveness entrance in around 1.0600 (23.6% expansion).


USD/JPY Daily Chart

Chart – Created Using Trading View

  • The near-term decrease in USD/JPY appears to be losing movement forward of channel support, with a span during risk for a incomparable miscarry as a Relative Strength Index (RSI) fails to pull into oversold territory; a spin in a oscillator might stoke a incomparable miscarry in a sell rate generally as a Nikkei (JPN225) highlights a identical behavior, with a tellurian benchmark equity index climbing behind from a monthly low of 18,897.
  • Risk view might continue to change a dollar-yen sell rate as a Bank of Japan (BoJ) sticks to a Quantitative/Qualitative Easing (QQE) Program with Yield-Curve Control and keeps a 10-year produce tighten to zero; however, Japan’s 2016 mercantile year-end might beget choppy to whipsaw-like cost movement as a DailyFX Speculative Sentiment Index (SSI) shows a sell throng stays stranded on a wrong side.
  • According to a SSI, sell traders have been net-long USD/JPY since January 9 when a span traded nearby 116.30; notwithstanding a dissimilarity paths for financial policy, USD/JPY has changed 4.4% reduce given then and a span might continue to give behind a pointy allege from late-2016 as cost RSI continue to work within a bearish formation.
  • The mangle subsequent a support-zone around 111.30 (50% retracement) to 111.60 (38.2% retracement) keeps a near-term opinion slanted to a downside, with a subsequent segment of seductiveness entrance in around 109.40 (50% retracement) to 109.90 (78.6% expansion); nevertheless, an contingent pierce behind above a Fibonacci overlie might pave a incomparable liberation in a sell rate, with a initial topside jump entrance in around 112.40 (61.8% retracement) to 112.80 (38.2% expansion).

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  • The DailyFX Speculative Sentiment Index (SSI) shows a sell throng has been net-short EUR/USD given Mar 15, while traders sojourn net-long USD/JPY given Jan 9.
  • Retail merchant information shows 34.6% of traders are net-long EUR/USD with a ratio of traders brief to prolonged during 1.89 to 1. The series of traders net-long is 11.8% aloft than yesterday and 16.5% aloft from final week, while a series of traders net-short is 11.9% reduce than yesterday and 2.8% reduce from final week.
  • Retail merchant information shows 73.0% of traders are net-long USD/JPY with a ratio of traders prolonged to brief during 2.71 to 1. The series of traders net-long is 0.7% reduce than yesterday and 24.7% aloft from final week, while a series of traders net-short is 5.1% reduce than yesterday and 16.1% reduce from final week.

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— Written by David Song, Currency Analyst

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