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Bearish GBP/USD Pattern in Focus- USD/CAD to Target 1.1000?

Bearish GBP/USD Pattern in Focus- USD/CAD to Target 1.1000?

David Song, Strategist

Talking Points:

- GBP/USD Retains Descending Channel Ahead of BoE; March Low (1.6458) on Horizon?

- USD/CAD to Test 1.1000 on Dovish BoC; Lower-High in Place?

- USDOLLAR Remains Overbought; Monthly Opening Range in Focus.

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GBP/USD

Bearish GBP/USD Pattern in Focus- USD/CAD to Target 1.1000?
  • Remains at risk of a further decline as the descending channel remains in play, while the Relative Strength Index (RSI) dips back into oversold territory; next key objective is the March low (1.6458).
  • Need to see a larger dissent within the Bank of England (BoE) to see a material shift in the near-term outlook for GBP/USD.
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd is increasing their net-long exposure on GBP/USD as the ratio climbs to +2.10.

USD/CAD

Bearish GBP/USD Pattern in Focus- USD/CAD to Target 1.1000?
  • Appears to have carved a higher-low in August following the failed attempts to close below 1.0820 (61.8% retracement) to 1.0830(61.8% retracement).
  • May see a more meaningful run at 1.1000 handle should the Bank of Canada (BoC) retain a relatively dovish tone and call for a prolonged period of interest rate stability.
  • Need a bullish break in the RSI to favor a higher-high & resumption of the long-term bullish trend.

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Read More:

Price & Time: Key Week Ahead For the Financial Markets

COT: Euro and Yen Positioning Near Record Levels

USDOLLAR

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10702.33

10707.06

10651.73

0.45

196.11%

Bearish GBP/USD Pattern in Focus- USD/CAD to Target 1.1000?Bearish GBP/USD Pattern in Focus- USD/CAD to Target 1.1000?

Chart - Created Using FXCM Marketscope 2.0

USDOLLAR(Ticker: USDollar):

  • Dow Jones-FXCM U.S. Dollar Index climbs to a fresh monthly high of 10,706 as ISM Manufacturing climbs to 59.0- highest reading since March 2011.
  • Despite the overbought RSI reading, next topside target comes in around 10,710 (23.6% retracement) to 10,716 (38.2% retracement).
  • Will continue to wait for a bearish RSI break for a more meaningful move back towards former resistance around 10,555 (50.0% retracement) to 10,561 (100% expansion).

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Release

GMT

Expected

Actual

Markit Purchasing Manager Index Manufacturing (AUG F)

13:45

58.0

57.9

ISM Manufacturing (AUG)

14:00

57.0

59.0

ISM Prices Paid (AUG)

14:00

58.5

58.0

Construction Spending (MoM) (JUL)

14:00

1.0%

1.8

IBD/TIPP Economic Optimism (SEP)

14:00

45.5

45.2

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--- Written by David Song, Currency Analyst

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

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