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GBP Remains Vulnerable- USD/CAD Risks Larger Correction on Upbeat BoC

GBP Remains Vulnerable- USD/CAD Risks Larger Correction on Upbeat BoC

David Song, Strategist

Talking Points:

- GBP/USD Rebounds Amid Sticky Core Inflation- Will BoE Minutes Reveal Larger Dissent?

- USD/CAD Risks Larger Correction on Less-Dovish Rhetoric from BoC Governor Stephen Poloz

- USDOLLAR Vulnerable to Dovish FOMC; Forward-Guidance for Monetary Policy in Focus

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GBP/USD

GBP Remains Vulnerable- USD/CAD Risks Larger Correction on Upbeat BoC
  • Despite sticky core inflation in the U.K, the GBP/USD remains vulnerable to a further decline should the Bank of England (BoE) Minutes show another 7-2 split, while Scotland Referendum poses the largest risk for surprise should the region leave the U.K.
  • Despite the bullish break in the Relative Strength Index (RSI), the oscillator could be carving out another lower-high as it dips back into oversold territory.
  • Nevertheless, the DailyFX Speculative Sentiment Index (SSI) continues to narrow, with the ratio currently standing at +1.15.

USD/CAD

GBP Remains Vulnerable- USD/CAD Risks Larger Correction on Upbeat BoC
  • USD/CAD slips to fresh weekly low of 1.0971 as Bank of Canada (BoC) Governor Stephen Poloz natural recovery ‘appears to be underway.’
  • Nevertheless, will continue to look for a higher-low as the pair carves a higher-high in September; inverse head-and-shoulders remains in play as RSI retains bullish momentum.
  • Next downside region of interest comes in around 1.0900 (23.6% retracement) to 1.0920 (50.0% retracement).

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Read More:

Price & Time: Gold Exhaustion Near?

GBP/USD Extends Losses Below 1.6200 As UK CPI Slows To A 5-Year Low

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10843.53

10898.71

10829.7

-0.30

170.24%

GBP Remains Vulnerable- USD/CAD Risks Larger Correction on Upbeat BoCGBP Remains Vulnerable- USD/CAD Risks Larger Correction on Upbeat BoC

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar Index continues to mark string of higher-highs going into the Federal Open Market Committee (FOMC) meeting; still watching the July 2013 high (11,009).
  • We will continue to favor topside targets as long as the RSI retains the bullish trend & continues to push deeper into overbought territory.
  • The forward-guidance laid out by the FOMC will be the key focus as the central bank looks to halt its asset-purchase program at the October 29 meeting.

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Release

GMT

Expected

Actual

Produce Price Index (MoM) (AUG)

12:30

0.0%

0.0%

Produce Price Index (YoY) (AUG)

12:30

1.8%

1.8%

Produce Price Index ex Food and Energy (MoM) (AUG)

12:30

0.1%

0.1%

Produce Price Index ex Food and Energy (YoY) (AUG)

12:30

1.8%

1.8%

Net Long-term TIC Flows (JUL)

20:00

$25.0B

Total Net TIC Flows (JUL)

20:00

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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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