EUR/USD Slumps Following Brexit; 2017 Bullish Formations during Risk

Talking Points:

AUD/USD Eyes 2017 High Ahead of RBA Meeting; RSI Divergence Persists.

EUR/USD Extends Losses Following ‘Brexit’ Trigger; 2017 Bullish Formations during Risk.

DailyFX Table

AUD/USD Daily

AUD/USD Daily Chart

Chart – Created Using Trading View

  • AUD/USD appears to be creation a run during a 2017 high (0.7749) with a former-resistance section around 0.7590 (100% expansion) to 0.7600 (23.6% retracement) charity support, yet a span might continue to work within a 2016 operation amid a ongoing dissimilarity in a Relative Strength Index (RSI); need to see a oscillator mangle a bearish arrangement carried over from Feb to preference a broader allege in a sell rate.
  • Even yet a Reserve Bank of Australia (RBA) is widely approaching to keep a stream process during a Apr 4 meeting, a new news by Fitch Ratings remarkable ‘all 4 of a vital banks – ANZ, CBA, NAB and Westpac – this month increasing lending rates, essentially on financier and interest-only mortgages, that runs opposite to a Reserve Bank of Australia’s (RBA) rate slicing cycle of new years,’ and a pickup in private-lending rates might pull Governor Philip Lowe and Co. to tame marketplace expectations generally as ‘recent information continued to advise that there had been a rave of risks compared with a housing market.’
  • Moreover, with a Federal Open Market Committee (FOMC) also expected to stay on reason during a subsequent seductiveness rate preference on May 3, a wait-and-see proceed by both executive banks might keep a aussie-dollar sell rate within a 2016 operation as marketplace participants sign a timing of a subsequent rate-hike.
  • With that said, a shutting cost above a 0.7650 (38.2% retracement) jump might beget another run during a pivotal insurgency section around 0.7730 (61.8% retracement) to 0.7770 (61.8% expansion), yet a span might onslaught to keep a allege from progressing this year as prolonged as a RSI preserves a bearish arrangement from February.

EUR/USD Daily

EUR/USD Daily Chart

Chart – Created Using Trading View

  • EUR/USD extends a decrease from progressing this week as a U.K. rigourously triggers Article 50 of a Lisbon Treaty, with a span during risk for serve waste as it carves a near-term array of reduce highs lows; miss of movement to pull above a former-support section around 1.0880 (61.8% expansion) to 1.0910 (38.2% expansion) might criticise a allege from progressing this month amid a failed try to mangle out of a downward trend carried over from 2016.
  • The single-currency stands during risk of confronting additional headwinds over a residue of a week as a Euro-Zone’s Consumer Price Index (CPI) is expected to uncover a slack in both a title and core rate of inflation, and a European Central Bank (ECB) might come underneath increasing vigour to serve support a financial kinship as President Mario Draghi and Co. onslaught to grasp their one and usually charge to safeguard cost stability; might see a Governing Council keep a doorway open to serve extend a deadline for a quantitative easing (QE) module during a subsequent assembly on Apr 27.
  • Moreover, uninformed tongue from Federal Open Market Committee (FOMC) officials (Dallas Fed President Robert Kaplan, New York Fed President William Dudley and Minneapolis Fed President Neel Kashkari) might import on EUR/USD generally as Fed Vice-Chair Stanley Fischer sees range for dual some-more rate-hikes in 2017; will continue to lane marketplace expectations as Fed Fund Futures still cost a reduction than 60% luck for a pierce in June.
  • In turn, a tighten next 1.0780 (100% expansion) might coax a pierce behind towards channel support, that lines adult with a Fibonacci overlie around 1.0660 (50% expansion) to 1.0680 (78.6% expansion); might see a identical greeting in a RSI, with a span during risk of fluctuating a bearish trend from 2016 should cost a oscillator onslaught to safety a bullish formations from progressing this year.

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DailyFX SSI

  • The DailyFX Speculative Sentiment Index (SSI) shows sell position stays mostly unvaried for a Euro and Australian dollar, with a throng net-short EUR/USD given Mar 15, while traders have been net-short AUD/USD given January 9.
  • Retail merchant information shows 40.0% of traders are net-long EUR/USD with a ratio of traders brief to prolonged during 1.5 to 1. The series of traders net-long is 32.8% aloft than yesterday and 42.6% aloft from final week, while a series of traders net-short is 18.2% reduce than yesterday and 18.3% reduce from final week.
  • Retail merchant information shows 35.6% of traders are net-long AUD/USD with a ratio of traders brief to prolonged during 1.81 to 1. The series of traders net-long is 5.2% reduce than yesterday and 20.2% aloft from final week, while a series of traders net-short is 12.5% reduce than yesterday and 13.1% reduce from final week.

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— Written by David Song, Currency Analyst

To hit David, e-mail dsong@dailyfx.com. Follow me on Twitter during @DavidJSong.

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