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USD Remains at Risk for Further Losses- GBP to Search for Higher Low?

USD Remains at Risk for Further Losses- GBP to Search for Higher Low?

2014-02-17 18:40:00
David Song, Strategist
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Talking Points:

- USDOLLAR October Rebound at Risk- Bearish Momentum in Focus

- GBPUSD Outlook Remains Bullish Ahead of BoE Minutes

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10558.64

10561.83

10521.5

0.07

103.30%

USDOLLAR Daily

Forex_USD_Remains_at_Risk_for_Further_Losses-_GBP_to_Search_for_Higher_Low_body_Picture_3.png, USD Remains at Risk for Further Losses- GBP to Search for Higher Low?

Chart - Created Using FXCM Marketscope 2.0

  • Watching Former Support Regions for New Resistance
  • RSI Bounce Highlights Correction- Bearish Momentum Remains in Focus
  • Interim Resistance: 10,657 (61.8 expansion)- Former Support
  • Interim Support: 10,509 (23.6 retracement) to 10,524 (38.2 retracement)

Release

GMT

Expected

Actual

U.S. Market Close for Presidents Day

Despite thin market conditions, the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) bounced back during the holiday trade, and the greenback may face a larger recovery over the near-term should the fundamental developments coming out of the world’s largest economy raise the scope for another $10B taper at the Fed’s March 19 meeting.

The Federal Open Market Committee (FOMC) Minutes may heighten bets for another reduction in the asset-purchase program as a growing number of central bank officials see seasonal factors generating the recent slowdown in economic activity, and it seems as though the board will stay on its current course as long as the U.S. Consumer Price Report highlights a diminishing threat for disinflation.

Nevertheless, the lack of momentum to hold above the December low (10,565) has negated the near-term bullish bias, and we may see the dollar continue to give back the rebound from back in October (10,354) as the bearish momentum in the Relative Strength Index gathers pace.

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Forex_USD_Remains_at_Risk_for_Further_Losses-_GBP_to_Search_for_Higher_Low_body_ScreenShot111.png, USD Remains at Risk for Further Losses- GBP to Search for Higher Low?

GBPUSD Daily

Forex_USD_Remains_at_Risk_for_Further_Losses-_GBP_to_Search_for_Higher_Low_body_Picture_1.png, USD Remains at Risk for Further Losses- GBP to Search for Higher Low?
  • At Risk for Correction Following Higher High- Higher Low on Horizon
  • Interim Resistance: 1.6850-60 (78.6 expansion)
  • Interim Support: 1.6300 Pivot to 1.6310 (50.0 expansion)

Three of the four components weakened against the greenback, led by a 0.25 percent decline in the British Pound, and the GBPUSD is certainly at risk for a larger correction as it carves a higher high ahead of the Bank of England (BoE) Minutes.

Indeed, the fresh batch of central bank rhetoric may strengthen the bullish sentiment surrounding the sterling as Governor Mark Carney sees a stronger recovery in the U.K., and it seems as though the central bank may have little choice but to normalize monetary policy sooner rather than later amid the heightening threat of an asset-bubble.

With that said, we will continue to look for opportunities to ‘buy dips’ in the GBPUSD, and the pair should continue to carve a series of higher highs paired with higher lows amid the ongoing shift 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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