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GBP/USD Breaks Out Following Strong CPI- Retail FX Crowd Flips Short

GBP/USD Breaks Out Following Strong CPI- Retail FX Crowd Flips Short

Talking Points:

- GBP/USD Breaks Out on Strong U.K. Core CPI; Retail Crowd Flips Net-Short.

- AUD/USD Threatens Bullish RSI Momentum as RBA Waits for Fed Liftoff.

- USDOLLAR Continues to Come Off of Range Support Despite Mixed Housing Data.

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GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • GBP/USD breaks out of the recent range as U.K. Core Consumer Price Index climbs an annualized 1.2% versus expectations for a 0.9% print; need a close above 1.5630 (38.2% retracement) to 1.5650 (38.2% expansion) for confirmation/conviction for a further advance in the exchange rate.
  • With U.K. Retail Sales anticipated to rebound 0.4% in July, signs of a stronger recovery may boost the bullish sentiment surrounding the sterling as it puts increased pressure on the Bank of England (BoE) to normalize monetary policy.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd has flipped net-short GBP/USD following the U.K. CPI report, with the ratio slipping to -1.22 as 45% of traders are long.


AUD/USD Daily Chart
  • Ongoing failed attempts to close above 0.7380-90 (78.6% expansion) raises the risk for a further decline in AUD/USD especially if the Relative Strength Index (RSI) fails to preserve the bullish momentum carried over from the previous month.
  • Even though the Reserve Bank Australia (RBA) Minutes continued to endorse a wait-and-see approach, seems as though Governor Glenn Stevens and Co. is largely waiting for the Fed liftoff to weaken the exchange rate & assist with the rebalancing of the real economy.
  • Need a break/close below 0.7240-50 (100% expansion) to favor fresh 2015 lows, with the next area of interest coming in around 0.7180 (61.8% retracement).

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Read More:

Price & Time: Big Test Coming Up For Cable?

Webinar: USD Scalps Hinge on CPI- Setups in Play this Week

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11998.3512009.9611972.930.0371.19%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the mixed housing data coming out of the U.S. economy, the Dow Jones-FXCM U.S. Dollar continues to pare the decline from the previous week & starts to carve a recent series of higher highs & lows.
  • Despite forecasts for an uptick in the headline reading for the U.S. Consumer Price Index (CPI), any weakness in the core rate of inflation may drag on Fed expectations as the renewed weak oil/energy prices dampens the outlook for price growth.
  • With 11,951 (38.2% expansion) to 11,965 (23.6% retracement) offering near-term support, will keep a close eye 12,049 (78.6% retracement) for resistance.

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--- Written by David Song, Currency Analyst

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