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GBP/USD Continues Carve Bullish Pattern as Retail Crowd Remains Short

GBP/USD Continues Carve Bullish Pattern as Retail Crowd Remains Short

David Song, Strategist

Talking Points:

- GBP/USD Continues to Carve Bullish Pattern as Retail Crowd Remains Short.

- EUR/USD Pares Gains as ECB President Mario Draghi Endorses Easing Cycle.

- USDOLLAR RSI Continues to Flirt With Oversold Territory Ahead of U. of Michigan Confidence.

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GBP/USD

GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the uncertainties surrounding the fiscal outlook for the U.K., GBP/USD continues to carve a series of higher highs & lows; remains at risk for a further advance as the Relative Strength Index (RSI) pushes deeper into overbought territory.
  • Will keep a close eye on the U.K. Consumer Price Index (CPI) coming out on May 19 as the core rate of inflation is expected to hold steady at an annualized 1.0%- the slowest pace of growth since July 2006..
  • Despite the fresh monthly high, DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short GBP/USD since May 11, with the ratio nearing extremes as it sits at -1.46.

EUR/USD

EUR/USD Daily Chart
  • EUR/USD falls back from a fresh monthly high of 1.1443 as European Central Bank (ECB) President Mario Draghi pledges to carry on with the EUR 60B/monthly purchases & retain the easing cycle ‘as long as needed.’
  • Positive data prints coming out of the euro-area may foster speculation for a ‘taper tantrum,’ but the long-term outlook remains bearish as European policy makers favor a weaker exchange rate.
  • Another close above 1.1300 (78.6% retracement) paired with the bullish RSI momentum raises the risk of seeing a run at the February high (1.1532).

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Read More:

Forex Trader Sentiment Leaves us in Favor of Selling US Dollar

Price & Time: Lost Opportunity for USD?

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11666.74

11680.21

11634.91

0.01

64.67%

GBP/USD Continues Carve Bullish Pattern as Retail Crowd Remains ShortUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar remains at risk for a further decline as the bearish setup remains in play; keeping a close eye on the RSI for a move into oversold territory.
  • Despite expectations for the U. of Michigan Confidence survey to hold steady at 95.9 in May, a deviation from market expectation may produce increased volatility in the greenback as market participants weigh the outlook for monetary policy.
  • Still waiting on a close below 11,646 (61.8% retracement) for a more meaningful run at channel support/2015 low (11,550).

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GBP/USD Continues Carve Bullish Pattern as Retail Crowd Remains Short

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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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