US DOLLAR CURRENCY VOLATILITY: EURUSD SET TO SWING ON ECB RATE DECISION, US INFLATION
US Greenback worth motion is about to warmth up subsequent week with EURUSD within the highlight forward of the September ECB assembly and US inflation report The DXY Index might reply much less to USD-driven influences with the Federal Reserve blackout interval in impactBe a part of DailyFX analysts for Dwell Webinar Protection of main information releases and buying and selling methods hosted repeatedly all through the week
Our weekly US Greenback Technical Outlook succumbed to basic headwinds stemming from uninspiring information prints on America’s economic system. Lackluster US Greenback worth motion all through the week will also be largely attributed to spot GBPUSD surging on upbeat Brexit developments in addition to a rebound in spot EURUSD pushed by commentary from ECB officers. EURUSD and GBPUSD respectfully comprise 57.6% and 11.9% of the DXY Index – a well-liked basket of USD forex pairs.
DXY INDEX – US DOLLAR PRICE CHART: DAILY TIME FRAME (MARCH 15, 2019 TO SEPTEMBER 06, 2019)
Chart created by @RichDvorakFX with TradingView
Trying forward, the DXY US Greenback Index nonetheless has potential to forge a bullish reversal again towards its highest degree since Could 2017 from a technical perspective, which we identified in Thursday’s US Greenback volatility report. USD worth motion has thus far discovered help from its upward sloping 20-day easy transferring common barely above the 98.00 deal with. This space of technical confluence is highlighted by the 38.2% Fibonacci retracement of the US Greenback’s regular ascent from its June 25 low to September 03 excessive.
If promoting strain continues all through subsequent week, nonetheless, the DXY Index might look to its 50-day easy transferring common which rests across the mid-point of its aforementioned bullish leg. Other than US Greenback technicals, it’s price noting the sizable impression that Wednesday’s European Central Financial institution (ECB) rate of interest resolution stands to have on the DXY Index contemplating the basket is weighted heavy to EURUSD. Additionally, a slew of financial indicators shall be launched on the US economic system which have potential to weigh on charge merchants’ expectations for extra financial coverage lodging from the Federal Reserve.
US DOLLAR – FOREX ECONOMIC CALENDAR
Whereas the US Greenback foreign exchange financial calendar is jam-packed with information releases scheduled for subsequent week, markets will seemingly place extra credence on the US client worth index (CPI) report set to cross the wires Thursday at 12:30 GMT. Though US retail gross sales and client sentiment current high-impact occasion danger and should spark US Greenback worth motion, the Federal Reserve stands to put heavier weight on inflation readings seeing that worth stability is likely one of the central financial institution’s said twin mandates. As such, the August CPI report is anticipated to overshadow Fed financial coverage expectations.
US DOLLAR 1-WEEK IMPLIED VOLATILITY & TRADING RANGES
As beforehand talked about, the September ECB assembly will extra seemingly than not impression the US Greenback and DXY Index. In gentle of main occasion danger surrounding a central financial institution rate of interest resolution and up to date financial coverage outlook, it’s to be anticipated that implied volatility ought to tick greater as uncertainty builds and hypothesis swirls round what would possibly really unfold. That stated, EURUSD 1-week implied volatility of 6.33% matches our assumption contemplating it’s above the 20-day common studying of 5.14% and falls within the high 60th percentile during the last 12-months.
On the other facet of the spectrum, US Greenback implied volatility for the week forward is significantly muted for USDCAD and AUDUSD. This might be attributed to the September BOC assembly now within the rearview mirror and optimistic US-China commerce struggle developments crushing volatility measures extra broadly.
EURUSD – IG CLIENT SENTIMENT INDEX PRICE CHART: DAILY TIME FRAME (MARCH 11, 2019 TO SEPTEMBER 06, 201910)
On one other observe, the newest IG Shopper Sentiment information on spot EURUSD signifies that 60.9% of retail merchants are net-long leading to a long-to-short ratio of 1.56 to 1. Additionally, the variety of merchants net-long is 18.1% decrease whereas the variety of merchants net-shorts is 45.four% greater in comparison with final week’s figures. Though we sometimes maintain a contrarian view on crowd sentiment, the current adjustments in shopper positioning means that spot EURUSD might quickly reverse greater regardless of merchants stay net-long.
— Written by Wealthy Dvorak, Junior Analyst for DailyFX.com
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