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EUR/USD likely leads another dollar decline

Posted by Marge Maresca on Aug 25, 2017 11:19:06 AM


EUR/USD likely leads another dollar decline
Traders should expect a softer dollar and stronger EUR after Jackson Hole. Fed events this year have mostly been preceded by speculation about rate rises and followed by markets pricing out future Fed tightening. The amount of hikes priced by Fed funds over the next two years fell to a new low this week, suggesting the pattern is repeated today. Even if the Fed chair were to signal the possibility of another hike this year, huge yield advantages still favour many emerging market currencies. If she does not the dollar will go down broadly and is likely to underperform versus EUR. Draghi may try to dampen expectations for a taper but won't kill off the idea. Both the IFO, which is close to its 26 year peak, and solid eurozone PMI data support a stronger EUR. The key is that EUR/USD has consolidated huge gains near trend highs irrespective of large spec longs. If Draghi fails to quash hawks EUR/USD may fly.

Cable bears target weekly cloud base
The underlying cable trend remains bearish and the weekly cloud base at 1.2406 is a viable downside objective despite a Doji reversal on the daily candles. Prices have been inching lower through the cloud since the rejection from the 2017 1.3267 high on August 3 with spot set for another lower weekly close today. The current rebound from the lower 30-D Bollinger and 2-month low at 1.2774 Thursday looks technically corrective and oversold slow stochs suggest there will be better levels to join the bear trend. Recovery action could stretch back to the daily cloud, spanning 1.2858/1.2913, where the base at 1.2858 is a good place to offer. The falling 10-DMA almost coincides with the cloud base, at 1.2860, and reinforces resistance there. The 100-DMA provides a further resistance level at 1.2889 while Thursday's 1.2774 low and the lower 30-D Bollinger at 1.2765 are downside supports. Charts: 1) 2)  




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