Talking Points:
- GBP/USD Rebounds From Fresh Monthly Low With Signs of Exhaustion Taking Shape.
- USD/CAD Threatens Bullish RSI Formation Ahead of Canada Retail Sales, CPI.
- USDOLLAR Overbought Signal in Focus as Lackluster Data Continues.
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Chart - Created Using FXCM Marketscope 2.0
- GBP/USD remains at risk for a further decline especially as the Relative Strength Index (RSI) sits in oversold territory, but a failure to retain the bearish formation from back in December may generate a near-term rebound in the exchange rate as the oscillator comes off of an extreme reading.
- Nevertheless, the British Pound may face additional headwinds over the coming days as the U.K. Retail Sales report is expected to show a 0.3% contraction in December, and a market slowdown in private-sector consumption may drag on interest rate expectations as the Bank of England (BoE) remains in no rush to normalize monetary policy.
- The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long GBP/USD since November 19, but the ratio remains off of recent extremes as it currently sits at +2.48, with 71% of traders now long.
USD/CAD
- USD/CAD looks poised for a larger pullback as the Bank of Canada (BoC) endorses a wait-and-see approach, with the RSI falling back from overbought territory to threaten the bullish formation from back in November.
- The Canadian dollar may continue to gain ground over the next 24-hours of trading as Canada Retail Sales are projected to increase another 0.2% in December, while the Consumer Price Index (CPI) is expected to advance an annualized 1.7% following the 1.4% expansion in November.
- Will keep a close eye on former-resistance zones for new support, with the first region of interest coming in around 1.4040 (78.6% expansion) to 1.4090 (23.6% expansion).
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12262.54 | 12299.77 | 12252.7 | 0.00 | 132.75% |
Chart - Created Using FXCM Marketscope 2.0
- Even the long-term outlook for the USDOLLAR remains bullish, with the index marking a fresh monthly high of 12,299, the near-term advance appears to be getting exhausted as the RSI struggles to hold above 70.
- Will keep a close eye on interest rate expectations ahead of the Federal Reserve’s January 27 interest rate decision as the mixed data prints coming out of the U.S. economy dampens the central bank’s expectations for improved growth and inflation in 2016.
- With the USDOLLAR finally testing the topside targets around 12,273 (161.8% expansion) to 12,296 (100% expansion), a near-term pullback may open the former-resistance zones, with the first area of interest coming in around 12,176 (78.6% expansion) to 12,219 (November high).
Read More:
GBP/USD – Trend vs Extreme Sentiment
Like Clockwork, Draghi’s Threat of Action Next Meeting Sinks EUR/USD
WTI Crude Oil Price Forecast: You Can’t Spell Turmoil without Oil
S&P 500 - Everybody Too Bearish Too Soon?
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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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