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USD Searches for Support on Fed Delay- GBP Eyes 1.6300 on BoE

USD Searches for Support on Fed Delay- GBP Eyes 1.6300 on BoE

David Song, Strategist

Talking Points:

- USDOLLAR Slips to Fresh Monthly Low; Fed to Further Delay Exit

- GBPUSD Carves Higher Low Ahead of Bank of England (BoE) Minutes

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10418.28

10531.56

10414.64

-0.97

255.53%

USDOLLAR Daily

Forex_USD_Searches_for_Support_on_Fed_Delay-_GBP_Eyes_1.6300_on_BoE_body_Picture_3.png, USD Searches for Support on Fed Delay- GBP Eyes 1.6300 on BoE

Chart - Created Using FXCM Marketscope 2.0

  • Fails to Maintain Range; Slips to Fresh Monthly Low (10,414)
  • Bearish Relative Strength Index Momentum Gathers Pace
  • Former Support to Act as New Resistance: 10,470 Pivot
  • Interim Support: 10,470 Pivot

Release

GMT

Expected

Actual

Fed's Richard Fisher to Speak on U.S. Economy

11:45

Initial Jobless Claims (OCT 12)

12:30

335K

358K

Continuing Claims (OCT 5)

12:30

2915K

2859K

Philadelphia Fed. (OCT)

14:00

15.0

19.8

Fed's Charles Evans Speaks on U.S. Economy

16:45

Fed's Esther George Speaks on the U.S. Economy

16:45

Fed's Narayana Kocherlakota Speaks on Monetary Policy

18:45

A relief rally failed to materialize in the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) and the greenback may face additional headwinds over the near-term as market participants anticipate a further delay in the Fed’s exit strategy.

Indeed, the market reaction to the U.S. debt-deal points to a larger theme for the dollar as Standard & Poor’s warns of a slower recovery in the world’s largest economy, and the fiscal drag may encourage the Federal Open Market Committee (FOMC) to carry its highly accommodative policy stance into 2014 in an effort to limit the downside risks for growth and inflation.

At the same time, the Fed may sit pat until March as Congress is set to revisit the debt-deal in February, and the bearish sentiment surrounding the reserve currency may gather pace going into the Fed’s October 29-30 meeting as we see a growing number of central bank officials adopt a more dovish tone for monetary policy.

Forex_USD_Searches_for_Support_on_Fed_Delay-_GBP_Eyes_1.6300_on_BoE_body_ScreenShot253.png, USD Searches for Support on Fed Delay- GBP Eyes 1.6300 on BoE

GBPUSD Daily

Forex_USD_Searches_for_Support_on_Fed_Delay-_GBP_Eyes_1.6300_on_BoE_body_Picture_1.png, USD Searches for Support on Fed Delay- GBP Eyes 1.6300 on BoE
  • Remains Stuck in Range; Higher Low in Place?
  • Relative Strength Index Rebounds From 50 Mark Following Bullish Break
  • Interim Resistance: 1.6300 Pivot (2012 highs)
  • Interim Support: 1.5900-10 (78.6% Fibonacci expansion)

The dollar weakened across the board, led by a 1.29 percent rally in the British Pound, and the GBPUSD appears to be coiling up for a more meaningful move at the 1.6300 handle amid the positive develops coming out of the U.K.

In light of the stronger recovery, Bank of England (BoE) board member Spencer Dale argued that there is scope for a rate hike in 2014, and the material shift in the policy outlook should continue to prop up the sterling as the central bank looks to implement its exit strategy ahead of schedule.

In turn, the GBPUSD looks poised to carve a higher high as it builds a short-term base ahead of the BoE Minutes, and the fresh batch of central bank rhetoric may prompt fresh monthly highs in the exchange rate should the committee sound more hawkish this time around.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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