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USDOLLAR to Eye Fresh Lows on Cautious Fed- GBP Lower High in Place?

USDOLLAR to Eye Fresh Lows on Cautious Fed- GBP Lower High in Place?

2014-02-19 18:15:00
David Song, Strategist
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Talking Points:

- USDOLLAR Remains Vulnerable on Dovish FOMC Minutes

- British Pound Bounces Off of Former Support- Lower High in Place?

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10557.43

10567.72

10549.11

-0.04

50.98%

USDOLLAR Daily

Forex_USDOLLAR_to_Eye_Fresh_Lows_on_Cautious_Fed-_GBP_Lower_High_in_Place_body_Picture_3.png, USDOLLAR to Eye Fresh Lows on Cautious Fed- GBP Lower High in Place?

Chart - Created Using FXCM Marketscope 2.0

  • Looking for Lower High as Bearish RSI Momentum Continues to Take Shape
  • 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

Housing Starts (JAN)

13:30

950K

880K

Housing Starts (MoM) (JAN)

13:30

-4.9%

-16.0%

Building Permits (JAN)

13:30

975K

937K

Building Permits (MoM) (JAN)

13:30

-1.6%

-5.4%

Producer Price Index (MoM) (JAN)

13:30

0.1%

0.2%

Producer Price Index (YoY) (JAN)

13:30

1.2%

1.2%

Producer Price Index ex Food & Energy (MoM) (JAN)

13:30

0.1%

0.2%

Producer Price Index ex Food & Energy (YoY) (JAN)

13:30

1.4%

1.3%

Fed's Dennis Lockhart Speaks on U.S. Economy

17:15

Fed's James Bullard Speaks on U.S. Economy

18:00

Federal Open Market Committee Meeting Minutes

19:00

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is giving back the rebound from earlier this week following the slew of dismal data prints, and the Federal Open Market Committee (FOMC) Minutes may prompt a further decline in the greenback should we see a growing number of central bank officials adopt a more cautious tone for the world’s largest economy.

Indeed, Atlanta Fed President Dennis Lockhart argued that its ‘too early to draw a conclusion’ on whether the recent slowdown in economic activity is driven by seasonal factors or by a larger fundamental shift in the real economy, and warned that the ‘low readings of inflation are hard to square with stronger growth’ amid the threat for disinflation.

With that said, a material shift in the policy outlook may generate further USD weakness ahead of the next Fed meeting on March 19, and the dollar may face further headwinds throughout the year should market participants push back bets of seeing the FOMC lift the benchmark interest rate off of the record-low.

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

Forex_USDOLLAR_to_Eye_Fresh_Lows_on_Cautious_Fed-_GBP_Lower_High_in_Place_body_ScreenShot123.png, USDOLLAR to Eye Fresh Lows on Cautious Fed- GBP Lower High in Place?

GBPUSD Daily

Forex_USDOLLAR_to_Eye_Fresh_Lows_on_Cautious_Fed-_GBP_Lower_High_in_Place_body_Picture_1.png, USDOLLAR to Eye Fresh Lows on Cautious Fed- GBP Lower High in Place?
  • Price & RSI Retain Bullish Trend- Former Resistance Acting as New Support?
  • Interim Resistance: 1.6850-60 (78.6% expansion)
  • Interim Support: 1.6300 Pivot to 1.6310 (50.0% expansion)

Two of the four components strengthened against the greenback, led by a 0.20 percent advance in the British Pound, and the GBPUSD may have carved a higher low around 1.6630-40 (50.0 percent Fibonacci expansion) as the bullish trend continues to take shape.

Despite the bearish reaction to the U.K. Jobless Claims report, the 27.6K decline in unemployment benefits paired with the unexpected uptick in wage growth certainly highlights an improved outlook for growth and inflation, and it seems as though the Bank of England (BoE) will normalize monetary policy sooner rather than later as the central bank sees a stronger recovery in 2014.

With that said, we will continue to look for opportunities to ‘buy dips’ in the GBPUSD, and the pair may continue mark fresh highs over the near to medium-term as the fundamental outlook for the U.K. improves.

--- 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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