Talking Points:
– EUR/USD Fails to Break 1.20 Even as ECB’s Draghi Talks Up Quantitative Easing (QE).
– USD/CAD Breaks Out of Range; RSI Coming Up Against Overbought Territory.
– USDOLLAR Advance Capped by Weaker-than-Expected ISM Manufacturing.

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EUR/USD

Chart – Created Using FXCM Marketscope 2.0
May only be a matter of time before EUR/USD breaks 1.20 as European Central Bank (ECB) President Mario Draghi sees a risk for deflation; fueling bets for quantitative easing at the January 22 meeting.
Downside break in Relative Strength Index (RSI) to favor a further decline in EUR/USD, with the next target coming in around 1.1960-70 (78.6% expansion).
May see stops get triggered on a move below 1.20 as the DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long EUR/USD since December 16, with the ratio currently standing at +1.63.

USD/CAD

Weak crude oil prices may continue to drive USD/CAD higher as Bank of Canada (BoC) Governor Stephen Poloz remains in no rush to further monetary policy.
As RSI comes up against overbought territory, a topside push should provide conviction/confirmation for a further advance in dollar-loonie.
Next topside objective for USD/CAD comes in around 1.1750-60 (100% expansion).

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11617.20

11622.67

11545.66

0.60

149.55%

Chart – Created Using FXCM Marketscope 2.0
Dow Jones-FXCM U.S. Dollar struggling to hold its ground following the batch of dismal data prints; employment component of ISM Manufacturing may help to boost Non-Farm Payrolls (NFP) forecast as the index advanced to 56.8 from 54.9 in November.
Nevertheless, long-term outlook for USDOLLAR remains bullish as growing number of Fed officials show a greater willingness to normalize monetary; will have to see how the 2015 rotation will impact interest rate expectations.
Despite the lack of momentum to clear 11,623 (100% expansion), the RSI may highlight another topside move in USDOLLAR as the oscillator threatens the bearish momentum & looks to push back into overbought territory.

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Release

GMT

Expected

Actual

Markit Purchasing Manager Index- Manufacturing (DEC F)

14:45

54.0

53.9

ISM Manufacturing (DEC)

15:00

57.5

55.5

ISM Prices Paid (DEC)

15:00

44.0

38.5

Construction Spending (MoM) (NOV)

15:00

0.4%

-0.3%

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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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Source: Daily fx