Talking Points:
– USDOLLAR Pares Decline as Faster 4Q Inflation Undermines Dovish Fed Policy
– Euro Needs Close Above 1.3800 for Bullish View; ECB Meeting in Focus
Index
Last
High
Low
Daily Change (%)
Daily Range (% of ATR)
DJ-FXCM Dollar Index
10560.25
10583.77
10546.29
-0.19
105.57%
USDOLLAR Daily
Chart – Created Using FXCM Marketscope 2.0
Lower High Appears in Place as Bearish RSI Momentum Gathers Pace
Interim Resistance: 10,657 (61.8 expansion)- Former Support
Interim Support: 10,509 (23.6 retracement) to 10,524 (38.2 retracement)
Release
GMT
Expected
Actual
GDP Annualized (QoQ)(4Q S)
13:30
2.5%
Personal Consumption(4Q S)
13:30
2.9%
GDP Price Index(4Q S)
13:30
1.3%
Core PCE (QoQ) (FEB)
13:30
1.1%
ISM Milwalkee (FEB)
14:00
51
Chicago Purchasing Managers Index (FEB F)
14:45
56.4
Univ. of Michigan Confidence (FEB F)
14:55
81.2
Pending Home Sales (MoM) (JAN)
15:00
1.8%
Pending Home Sales (YoY)
15:00
-11.6%
Fed’s Stein, Kocherlakota, Evans and Plosser Speak in New York
15:15
GDP Annualized (QoQ)(4Q S)
13:30
2.5%
Personal Consumption(4Q S)
13:30
2.9%
GDP Price Index(4Q S)
13:30
1.3%
The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) bounced back from a fresh weekly low of 10,545 amid the unexpected uptick in 4Q inflation, but the technical outlook continues to favor ‘selling bounces’ in the greenback as it carves a lower high in February.
The bearish momentum in the Relative Strength Index (RSI) continues to suggest that former support around 10,615 will provide near-term resistance, and the dollar could be on course to mark a lower low as the recent slowdown in the U.S. economy drags on interest rate expectations.
With that said, the market reaction to next week’s Non-Farm Payrolls report may set the tone for March trading, and the dollar may continue to underperform against its major counterparts should the fundamental developments coming out of the world’s largest economy heighten the Fed’s scope to retain the zero-interest rate policy (ZIRP) for an extended period of time.
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EURUSD Daily
Failure to Close Above 1.3800 Should Preserve Bearish RSI Momentum
Interim Resistance: 1.3800 (100.0 expansion) to 1.3830 (61.8 retracement)
Interim Support: 1.3450 (38.2% retracement) to 1.3460 (50.0% expansion)
Two of the four components gained against the dollar, led by a 0.68 percent rally in the Euro, but a failure to close above the 1.3800 handle may continue to highlight a major top in the EURUSD amid the divergence in the RSI.
Despite the stronger-than-expected Euro-Zone Consumer Price report, the European Central Bank (ECB) may sound increasingly dovish in March amid the persistent slack in the real economy, and the single currency may face a sharp reversal next week should President Mario Draghi show a greater willingness to further embark on the easing cycle.
In turn, another failed attempt to close above 1.3800 should highlight a greater risk of seeing a short-term pullback in the EURUSD, and the pair may continue to follow the downward trend dating back to 2008 should the ECB’s 2016 economic projections highlight a threat for disinflation.
— 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
