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GBP/USD Threatens Bearish Channel Ahead of BoE Inflation Report

GBP/USD Threatens Bearish Channel Ahead of BoE Inflation Report

David Song, Strategist

Talking Points:

- GBP/USD Comes Up Against Channel Resistance Ahead of BoE Quarterly Inflation Report.

- USD/CAD Fails to Preserve Bullish RSI Momentum Going Into Canada Employment.

- USDOLLAR Fails to Benefit From Upbeat ISM Non-Manufacturing as Employment Component Slows.

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GBP/USD

GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • GBP/USD clears near-term range & climbs to a fresh weekly high of 1.5313 as Bank of England (BoE) preserves its current policy ahead of the Inflation Report due out on February 12.
  • Failure to maintain the bearish momentum in the Relative Strength Index (RSI) highlights the risk for a larger rebound in GBP/USD; waiting for a break & close above channel resistance for conviction/confirmation.
  • Seeing increased volatility in the DailyFX Speculative Sentiment Index (SSI) as retail-crowd turns net-short GBP/USD earlier this morning, with the ratio currently standing at -1.20.

USD/CAD

USD/CAD Daily Chart
  • USD/CAD vulnerable to a larger pullback as the RSI fails to retain the bullish momentum and comes off of overbought territory; market participants looking for a minor rebound of 5.0K in Canada employment following the unexpected 4.3K contraction in December.
  • May see USD/CAD continue to hold above 1.2340-50 (38.2% retracement) amid the string of closes above 1.2390-1.2400 (161.8% expansion).
  • As the RSI comes off of oversold territory, NZD/USD looks poised for a larger correction, with the key focus standing at the former support zone around 0.7600 (38.2% expansion) to 0.7620 (61.8% retracement).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11773.9611827.0611761.96-0.3793.04%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar may continue to face choppy price action ahead of the highly anticipated Non-Farm Payrolls (NFP) report as it retains the weekly range; market expectations are for another 230K expansion while the jobless rate is projected to hold steady at an annualized 5.6%.
  • Despite expectations for a Fed rate hike for mid-2015, will keep a close eye on the Average Hourly Earnings figure as the central bank struggles to achieve its 2% target for inflation.
  • Will watch former resistance around 11,721 (38.2% expansion) from here especially as the RSI threatens the bullish momentum carried over from the previous year.

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ReleaseGMTExpectedActual
Challenger Job Cuts (YoY) (JAN)12:30--17.6%
Non-Farm Productivity (4Q P)13:300.1%-1.8%
Unit Labor Costs (4Q P)13:301.2%2.7%
Initial Jobless Claims (JAN 31)13:30290K278K
Continuing Claims (JAN 24)13:302400K2400K
Trade Balance (DEC)13:30-$38.0B-$46.6B

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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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