AUD/USD Rebound Fizzles- EUR/USD Threatens Bearish RSI Momentum

Talking Points:

- AUD/USD Rebound Fizzles as China Widens Yuan Trading Band.

- EUR/USD Threatens Bearish Momentum Ahead of Greek Vote on Third-Bailout Program .

- USDOLLAR Remains Capped as Mixed Data Drags on Rate Expectations.

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AUD/USD

Chart - Created Using FXCM Marketscope 2.0

• AUD/USD under pressure as China – Australia’s largest trading partner – widens the Yuan trading-band by the most on record; may put increased pressure on the Reserve Bank of Australia (RBA) to further embark on its easing cycle amid the weakening outlook for global trade.
• May see a resumption of the long-term bearish trend as the Relative Strength Index (RSI) struggles to retain the bullish momentum carried over from the previous month; break/close below 0.7240 (100% expansion) should open up the next downside target around 0.7150 (161.8% expansion) to 0.7180 (61.8% retracement).
• DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long AUD/USD since May 15, with the ratio working its way back towards recent extremes as it climbs to 3.02 as 75% of traders are long.

EUR/USD

• Even though the long-term outlook for EUR/USD remains bearish, the failure to retain the bearish RSI momentum from back in May could expose the wedge/triangle formation from earlier this year especially as Greece makes greater steps to securing a third-bailout program.
• With the Euro-Zone’s 2Q Gross Domestic Product (GDP) report anticipated to show the growth rate climbing an annualized 1.3%, signs of a stronger recovery may spur a larger relief rebound in the single currency as it dampens bets of seeing the European Central Bank (ECB) further embark on its easing cycle.
• Break/close above near-term resistance around 1.1120 (61.8% retracement) may spur a more meaningful move at 1.1300 handle (78.6% retracement).

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USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• Dow Jones-FXCM U.S. Dollar faces a growing risk for a larger pullback amid the failed attempts to close above 12,049 (78.6% retracement); will wait for a break of the bullish RSI momentum for confirmation/conviction.
• Despite expectations for a September liftoff, the Federal Reserve may largely retain its current policy amid the ongoing mixed batch of data coming out of the U.S. economy.
• Will continue to watch the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement) for near-term support.

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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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