The British Pound advanced against the greenback for the second-day, with the exchange rate crossing above the 200-Day SMA (1.6112) to reach a high of 1.6194, and the GBP/USD may hold a broad range throughout the week as investors weigh the outlook for future policy. The pound-dollar remains nearly 90pips higher from the open after moving 98% of its daily ATR, and the overnight rally looks to have lost momentum ahead of 1.6200 as the 30-minute RSI falls back from a high of 72. As a result, we may see the GBP/USD trend lower throughout the North American trade and fill-in the gap from the 240-SMA at 1.6022, but the ongoing weakness in the greenback may keep the pair bid going into the Asian trade as the economic docket is expected to reinforce an improved outlook for the U.K.
The Japanese Yen was little changed overnight and remains the weakest of the majors following the rise in risk appetite, and the low-yielding currency could face increased selling pressures going into the Asian session as traders move into higher risk/reward investments. The USD/JPY is relatively flat on the day after moving approximately 53% of its average true range, and the near-term rally carried over from December looks to be losing steam as price action fails to hold above the 200-Day SMA at 93.46. As a result, we may see the exchange rate push lower over the week and test the 20-Day SMA at 91.49 for short-term support, but a break below this level is likely to expose the 100-Day at 90.58.
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
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