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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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 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):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 11773.96 | 11827.06 | 11761.96 | -0.37 | 93.04% |
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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| Release | GMT | Expected | Actual |
|---|---|---|---|
| Challenger Job Cuts (YoY) (JAN) | 12:30 | -- | 17.6% |
| Non-Farm Productivity (4Q P) | 13:30 | 0.1% | -1.8% |
| Unit Labor Costs (4Q P) | 13:30 | 1.2% | 2.7% |
| Initial Jobless Claims (JAN 31) | 13:30 | 290K | 278K |
| Continuing Claims (JAN 24) | 13:30 | 2400K | 2400K |
| 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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