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GBP Capped by Channel Resistance- CAD to Face Sticky CPI Inflation

GBP Capped by Channel Resistance- CAD to Face Sticky CPI Inflation

2014-09-18 15:30:00
David Song, Currency Strategist
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Talking Points:

- GBP/USD to Break Out of Descending Channel on Scotland ‘No’ Vote

- USD/CAD Risks Larger decline on Sticky Canadian Consumer-Price Inflation

- USDOLLAR at Risk for More Meaningful Correction as RSI Threatens Bullish Momentum

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GBP/USD

GBP Capped by Channel Resistance- CAD to Face Sticky CPI Inflation
  • GBP/USD climbs to a fresh weekly high of 1.6408 ahead of the results to the Scotland Referendum, with the Relative Strength Index (RSI) continuing to come off of oversold territory; need to see a break & close above 1.6410 (61.8% retracement) to 1.6430 (50.0 expansion) to favor a bullish breakout.
  • However, the GBP/USD may struggle to hold above 1.6000 (50.0% retracement) should Scotland vote to leave the U.K.
  • DailyFX Speculative Sentiment Index (SSI) continues to show relative net-short U.S. dollar positioning, but the ratio for the GBP/USD continues to narrow as it stands at +1.09.

USD/CAD

GBP Capped by Channel Resistance- CAD to Face Sticky CPI Inflation
  • USD/CAD may face a larger decline over the next 24-hours of trade should Canada’s Consumer Price Index (CPI) boost interest rate expectations.
  • Headline reading is expected to show sticky price growth, while the core rate of inflation is expected to increase an annualized 1.8% in August after expanding 1.7% the month prior.
  • Strong Canada CPI print may undermine the bullish outlook for USD/CAD; break & close below the August low (1.0809) would invalidate the inverse head-and-shoulders formation.

Join DailyFX on Demand for Real-Time SSI Updates Across the Majors!

Read More:

Price & Time: Time To Be Cautious on AUD/USD?

Big Day for FX Markets - What We’re Watching

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10900.2

10938.37

10884.95

-0.18

117.31%

GBP Capped by Channel Resistance- CAD to Face Sticky CPI InflationGBP Capped by Channel Resistance- CAD to Face Sticky CPI Inflation

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar Index falls back from a fresh yearly high of 10,884 amid the mixed batch of data; Dallas Fed President Richard Fisher, the new dissenter on the Federal Open Market Committee (FOMC) is scheduled to speak at 21:00 GMT.
  • Despite the bullish reaction to the FOMC interest rate decision, the RSI highlights the risk for a larger correction should the oscillator fail to retain the bullish momentum.
  • Break of channel support may bring up former resistance around 10,758 (23.6% expansion) to 10,759 (61.8% retracement).

Join DailyFX on Demand for Real-Time SSI Updates!

Release

GMT

Expected

Actual

Initial Jobless Claims (SEP 13)

12:30

305K

280K

Continuing Claims (SEP 6)

12:30

2466K

2429K

Housing Starts (AUG)

12:30

1037K

956K

Housing Starts (MoM) (AUG)

12:30

-5.2%

-14.4%

Building Permits (AUG)

12:30

1040K

998K

Building Permits (MoM) (AUG)

12:30

-1.6%

-5.6%

Fed Chair Janet Yellen Speaks on U.S. Economy

12:45

Philadelphia Fed. (SEP)

14:00

23.0

22.5

Household Change in Net Worth (2Q)

16:00

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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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