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Talking Points:

- EUR/USD Vulnerable Ahead of ECB Meeting Amid Growing Risk for Deflation

- GBP/USD Rebounds From Channel Support; RSI Holds in Overbought Territory

- USDOLLAR Remains Overbought; Fails to Clear Former Support

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EUR/USD

EUR at Risk on Slowing CPI- USDOLLAR Gaps Into Former Support

  • Struggles to fill the opening weekly gap as German IFO Business Confidence survey disappoints; Euro-Zone Consumer Price Index (CPI) in focus ahead of the next European Central Bank (ECB) meeting on September 4.
  • Next key topside region to watch comes in around 105.20 (50.0% expansion) to 105.50 (61.8% retracement), which includes the 2014 high of 105.43.
  • The DailyFX Speculative Sentiment Index (SSI) suggests retail crowd is buying into the opening week gap as the ratio climbs to +2.01.

GBP/USD

EUR at Risk on Slowing CPI- USDOLLAR Gaps Into Former Support

  • GBP/USD covers the gap as it rebounds from channel support; need the Relative Strength Index (RSI) to come back from overbought territory to favor a larger correction.
  • Despite the dissent within the Bank of England (BoE), we may not see a larger rift at the September 4 meeting as Ben Broadbent retains a rather dovish tone for monetary policy.
  • Nevertheless, Credit Suisse Overnight Index Swaps (OIS) show market participants are pricing a 50bp rise in the benchmark interest rate over the next 12-months.

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Read More:

Weekly Trading Forecast: Can the Dollar Extend its Bull Trend?

Gold Resumes Descent As USD Bulls Return, Crude Oil Lacking Fuel

USDOLLAR

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10646.6

10660.12

10637.87

0.10

75.71%

EUR at Risk on Slowing CPI- USDOLLAR Gaps Into Former SupportEUR at Risk on Slowing CPI- USDOLLAR Gaps Into Former Support

Chart - Created Using FXCM Marketscope 2.0

USDOLLAR(Ticker: USDollar):

  • Dow Jones-FXCM U.S. Dollar Index gaps higher as the Fed Economic Symposium spurs speculation for a rate hike sooner rather than later.
  • May fail to push back above support from earlier this year as the RSI remains capped by the 78.
  • Will look for a larger correction once RSI falls back from overbought territory & breaks the bullish trend carried over from July.
  • Interim Resistance: 10,657 (61.8% expansion) to 10,661 (23.6% retracement)
  • Interim Support: 10,555 (50.0% retracement) to 10,561 (100% expansion)

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Release

GMT

Expected

Actual

Chicago Fed National Activity Index (JUL)

12:30

0.20

0.39

Markit Purchasing Manager Index Services (AUG P)

13:45

58.0

58.5

Markit Purchasing Manager Index Composite (AUG P)

13:45

58.8

New Home Sales (JUL)

14:00

426K

412K

New Home Sales (MoM) (JUL)

14:00

5.8%

-2.4%

Dallas Fed Manufacturing Activity (AUG)

14:30

12.8

7.1

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