EUR/USD Retail Crowd Remains Heavily Net-Short Ahead of EU Summit

Talking Points:

- EUR/USD Remains at Risk for Relief Rally on Greek Deal- EU Summit in Focus.

- USD/JPY Bullish Outlook Mired by Softened Bank of Japan (BoJ) Verbal Intervention.

- USDOLLAR Continues to Carve Bearish Pattern Ahead of 1Q GDP, Core PCE.

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EUR/USD

Chart - Created Using FXCM Marketscope 2.0

• Despite the failed attempt to test the May high (1.1465), EUR/USD may face a relief bound should Greece reach a deal at the special EU Summit scheduled for Monday; will also keep a close eye on the headlines coming out of the European Central Bank (ECB) as it continues to support Greek banks.
• In contrast, a greater risk for a Greek default/exit is likely to drag on the Euro along with broader market sentiment as renews the threat for contagion.
• DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short EUR/USD since March 9, with the ratio approaching extremes as it currently stands at -2.24.

USD/JPY

• USD/JPY may continue to face range-bound prices over the near-term as the Bank of Japan (BoJ) softens its verbal intervention on the Yen & continues to endorse a wait-and-see approach.
• With the narrowing risk of seeing the BoJ further expand its asset-purchase program in 2015, may see the upbeat tone from Governor Haruhiko Kuroda heighten the appeal of Japanese assets especially as the central bank head remains confident in achieving the 2% inflation target in the first-half of fiscal year 2016.
• Need break/close below 122.30-40 (78.6% retracement) for a potential move back towards former resistance around 121.90 (38.2% expansion) to 122.01 (March high)

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Read More:

Price & Time: USD/JPY Still Bullish?

USD Shorts Remained Favored on FOMC Sell Off- Key Support 11,731

USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• The bearish formation in the Dow Jones-FXCM U.S. Dollar may continue to take shape in the week ahead amid the ongoing string of lower-highs; will keep a close eye on the Greek impasse as it risks for a flight to safety.
• Despite expectations of seeing a smaller contraction in 1Q GDP, a dismal reading for the core Personal Consumption Expenditure, the Fed’s preferred gauge for inflation, may trigger a further decline in the greenback as it drags on interest rate expectations.
• Closing price below 11,721 (38.2% expansion) to 11,745 (50% retracement) will bring the May low (11,634) on the radar, but a failure to retain the bearish RSI momentum may highlight range-bound prices for the days ahead.

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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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