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Larger USDOLLAR Pullback in View- GBP Resilience in Focus

Larger USDOLLAR Pullback in View- GBP Resilience in Focus

2014-01-14 18:35:00
David Song, Strategist
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Talking Points:

- USDOLLAR Limited by Former Support; Retail Sales Rises for Ninth Month

- British Pound Preserves Monthly Range- Higher Low in Place?

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10655.96

10658.88

10631.9

0.23

73.86%

USDOLLAR Daily

Forex_Larger_USDOLLAR_Pullback_in_View-_GBP_Resilience_in_Focus_body_Picture_3.png, Larger USDOLLAR Pullback in View- GBP Resilience in Focus

Chart - Created Using FXCM Marketscope 2.0

  • Former Support (10,657) Appears to Be Acting as New Resistance
  • Bearish Relative Strength Index Divergence Opens Downside Targets
  • Interim Resistance: 10,657 (61.8 extension)- Closing Basis
  • Interim Support: 10,561 (100.0 extension)- Closing Basis

Release

GMT

Expected

Actual

NFIB Small Business Optimism (DEC)

12:30

93.1

93.9

Advance Retail Sales (DEC)

13:30

0.1%

0.2%

Advance Retail Sales Less Autos (DEC)

13:30

0.4%

0.7%

Advance Retail Sales ex Auto and Gas (DEC)

13:30

0.3%

0.6%

Advance Retail Sales Control Group (DEC)

13:30

0.3%

0.7%

Import Price Index (MoM) (DEC)

13:30

0.4%

0.0%

Import Price Index (YoY) (DEC)

13:30

-0.6%

-1.3%

Business Inventories (NOV)

15:00

0.3%

0.4%

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

17:45

Fed's Richard Fisher Speaks on U.S. Economy

18:20

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) filled-in the opening gap from earlier this week as the better-than-expected Advance Retail Sales report raised the outlook for growth, but the technical outlook continues to highlight a bearish forecast for the days ahead as former support appears to be acting as new resistance.

With that said, the USDOLLAR looks poised for a larger decline ahead of the Fed’s January 29 meeting as the bearish divergence in the Relative Strength Index continues to take shape, and we may see a move back towards to 10,561 as the pair searches for support.

Nevertheless, fresh comments from central bank hawks Charles Plosser and Richard Fisher may prop up the dollar over the next 24-hours of trade as market participants weigh the prospects for monetary policy, and the longer-term forecast remains favorable to the upside as the Federal Open Market Committee (FOMC) moves away from its easing cycle.

Join DailyFX on Demandto Cover Current U.S. Dollar Trade Setups

Forex_Larger_USDOLLAR_Pullback_in_View-_GBP_Resilience_in_Focus_body_ScreenShot236.png, Larger USDOLLAR Pullback in View- GBP Resilience in Focus

GBPUSD Daily

Forex_Larger_USDOLLAR_Pullback_in_View-_GBP_Resilience_in_Focus_body_Picture_1.png, Larger USDOLLAR Pullback in View- GBP Resilience in Focus
  • Close Above Trendline Support Favors Topside Targets
  • Interim Resistance: 1.6550 (78.6 expansion) to 1.6600 Pivot
  • Interim Support: 1.6300 Pivot to 1.6310 (50.0 expansion)

Two of the four components weakened against the greenback, led by a 0.67 percent decline in the Australian dollar, while the British Pound gained 0.26 to preserve the bullish trend dating back to July.

Despite the slowdown in U.K. inflation, we’re seeing the GBPUSD continue to carve a higher low above the 1.6300 handle, and the pair certainly appears to be coiling up for another run at interim resistance as the Bank of England (BoE) looks to normalize monetary policy ahead of schedule.

In turn, we will retain our game plan to ‘buy dips’ in the GBPUSD, and the British Pound may continue to outperform against its major counterparts amid the deviation in the policy outlook.

--- 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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