Retail traders have been aggressively buying the sterling since long positions are up by 18.9%. Yet, when retail is long and buying more, the GBP/USD normally sells off in the following days. In fact, more long positions don't necessary suggest more confidence in the direction of the current trend since many of those traders who just entered the markets are also leaving their protective stop losses just below the current price action.
Over the last few days, the Canadian dollar has been trading in a very tight range against the U.S. dollar. Yet, I expect a new wave of dollar strength going forward which could propel USD/CAD to test the 1.10 resistance level.
The EURUSD made a weekly high today, confirming that a larger corrective advance is underway. This morning's spike low at 1.4726 should remain intact for the rest of the week and perhaps all of next week.
Growth in the world's largest economy was surprisingly strong in the period from April through June, owing largely to a substantial improvement to the trade account figures. Despite this number though, concerns for the second half were clearly showing through in price action as the dollar actually sold off against most of its counterparts shortly after the release.
Growth in the second quarter for the US economy is expected to have improved by 2.8%. An inline print would be significantly higher than the preliminary estimate of 1.9% and an improvement from the first quarter’s reading of 0.9%.
Currency Strategist
The Fed minutes released this passed week confirmed what the market has been pricing in for some months now: the next move in interest rates is likely to come in the form of a rate hike. However, for dollar traders, the operative question is not whether the policy board will hike or cut, but rather when.