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USDOLLAR Searching for Support- GBP Poised for Fresh Highs (1.6700)

USDOLLAR Searching for Support- GBP Poised for Fresh Highs (1.6700)

2014-02-07 17:05:00
David Song, Strategist
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Talking Points:

- USDOLLAR Searching for Support on Dismal NFP- 2014 Range at Risk

- British Pound Higher Low in Place Ahead of BoE Inflation Report?

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10648.16

10675.22

10630.54

-0.15

110.64%

USDOLLAR Daily

Forex_USDOLLAR_Searching_for_Support-_GBP_Poised_for_Fresh_Highs_1.6700_body_Picture_3.png, USDOLLAR Searching for Support- GBP Poised for Fresh Highs (1.6700)

Chart - Created Using FXCM Marketscope 2.0

  • Close Below Trendline Support Puts Bullish Bias at Risk
  • Downside Break in Relative Strength Index Highlights Further USD Weakness
  • Interim Resistance: 10,753 (23.6 expansion) to 10,759 (61.8 retracement)
  • Interim Support: 10,561 (100.0 extension)- Closing Basis

Release

GMT

Expected

Actual

Change in Non-Farm Payrolls (JAN)

13:30

185K

113K

Unemployment Rate (JAN)

13:30

6.7%

6.6%

Labor Force Participation Rate (JAN)

13:30

63.0%

Underemployment Rate (JAN)

13:30

12.7%

Change in Private Payrolls (JAN)

13:30

185K

142K

Change in Manufacturing Payrolls (JAN)

13:30

10K

21K

Two-Month Payroll Net Revision (JAN)

13:30

34K

Change in Household Employment (JAN)

13:30

638K

Average Hourly Earnings (MoM) (JAN)

13:30

0.2%

0.2%

Average Hourly Earnings (YoY) (JAN)

13:30

1.8%

1.9%

Average Weekly Hours (JAN)

13:30

34.4

34.4

Consumer Credit (DEC)

20:00

$12.550B

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) slipped to a fresh monthly low of 10,630 following the dismal Non-Farm Payrolls (NFP) report, and the greenback may ultimately threaten the 2014 range as it searches for support.

Indeed, there’s growing speculation that the Fed may take a less aggressive approach in normalizing monetary policy amid the ongoing slack in the labor market, and the dollar may face further headwinds in the week ahead should we see a growing number of Fed officials scale back their willingness to taper the asset-purchase program at the March 19 meeting.

With Fed Chairwoman Janet Yellen scheduled to deliver the Humphrey-Hawkins testimony in front of Congress next week, the new central bank head may struggle to substantiate a further reduction in monetary support, but it seems as though the FOMC will stay on course as they anticipate a stronger recovery this year.

With that said, the near-term correction in the USDOLLAR may ultimately generate a higher low as the Fed looks to halt Quantitative Easing later this year, but the fiscal outlook may undermine the bullish sentiment surrounding the reserve currency should U.S. policy makers struggle to meet on common ground.

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

Forex_USDOLLAR_Searching_for_Support-_GBP_Poised_for_Fresh_Highs_1.6700_body_ScreenShot061.png, USDOLLAR Searching for Support- GBP Poised for Fresh Highs (1.6700)

GBPUSD Daily

Forex_USDOLLAR_Searching_for_Support-_GBP_Poised_for_Fresh_Highs_1.6700_body_Picture_1.png, USDOLLAR Searching for Support- GBP Poised for Fresh Highs (1.6700)
  • Higher Low in Place Following Closes Above 1.6300; RSI Retains Bullish Trend
  • Interim Resistance: 1.6700 Pivot to 1.6730 (100.0 expansion)
  • Interim Support: 1.6300 Pivot to 1.6310 (50.0 expansion)

Three of the four components advanced against the greenback, led by a 0.44 percent rally in the British Pound, and the GBPUSD looks poised for a higher high following the constant closes above the 1.6300 handle.

In turn, it looks as though we have carved a higher low during the first full-week of February, and sterling may coil up for a more meaningful move at the 1.6700 handle as the Bank of England (BoE) looks to normalize monetary policy ahead of schedule.

The BoE’s quarterly inflation report highlights the biggest event risk for the Pound next week as market participants see Governor Mark Carney lowering the unemployment threshold down to 6.5 percent, but the central bank may merely implement a more dovish twist to its forward-guidance in an effort to strengthen its credibility.

--- 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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