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USDOLLAR Outlook Mired by Downside Inflation Risk- CPI in Focus

USDOLLAR Outlook Mired by Downside Inflation Risk- CPI in Focus

2014-11-19 20:35:00
David Song, Strategist
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Talking Points:

- USDOLLAR Fails to Break Monthly Opening Range as FOMC Highlights Downside Risk for Inflation.

- USD/JPY Extends Advance on Dovish BoJ- RSI Resistance in Focus.

- GBP/USD Rebounds from Fresh Monthly Low as BoE Sees Greater Risk for Inflation.

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11316.23

11320.06

11282.39

0.32

60.45%

USDOLLAR Outlook Mired by Downside Inflation Risk- CPI in FocusUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The Dow Jones-FXCM U.S. Dollar Index may hold the monthly opening range as the Federal Open Market Committee (FOMC) highlights the downside risk for inflation; still waiting for a bullish break in RSI for conviction/confirmation for another leg higher.
  • With the U.S. Consumer Price Index (CPI) expected to slow to an annualized 1.6% in October, a further downtick in the headline reading may generate a larger pullback in USDOLLAR as the Fed remains in no rush to normalize monetary policy.
  • Lack of momentum to close above 11,312 (78.6% retracement) and 11,351 (78.6% expansion) raises the risk for a larger correction; will watch former resistance around 11,120 (161.8% expansion) to 11,138 (61.8% expansion) for new support.

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Release

GMT

Expected

Actual

Housing Starts (OCT)

13:30

1025K

1009K

Housing Starts (MoM) (OCT)

13:30

0.8%

-2.8K

Building Permits (OCT)

13:30

1040K

1080K

Building Permits (MoM) (OCT)

13:30

0.9%

4.8%

Federal Open Market Committee Meeting Minutes

19:00

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USD/JPY

USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • USD/JPY extends advance as Bank of Japan (BoJ) Governor Haruhiko Kuroda sounds less confident in achieving the 2% target for inflation; .
  • May see a further advance in USD/JPY as the Relative Strength Index (RSI) pushes deeper into overbought territory, but will keep a close eye on the 87 figure for resistance on the oscillator.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd is net-short USD/JPY since November 12, with the ratio sitting at -1.41.

GBP/USD

GBP/USD Daily Chart
  • GBP/USD rebounds from a fresh monthly low (1.5588) even though the Bank of England (BoE) Minutes showed another 7-2 split as a growing number of central bank officials highlight a risk of overshooting the 2% target for inflation.
  • With U.K. Retail Sales projected to rebound 0.3% in October, positive data prints should heighten the appeal of the sterling as the BoE remains on course to normalize monetary policy in 2015.
  • As GBP/USD continues to hold above 1.5540 (78.6% retracement) to 1.5550 (61.8% expansion), will watch former support around 1.5890 (61.8% retracement) to 1.5900 (50% expansion) for new resistance.

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Read More:

Price & Time: Make Or Break For AUD/USD

NZDUSD Rally at Risk Sub 7975- Scalps Target Near-term Correction

--- Written by David Song, Currency Analyst

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

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