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USDOLLAR Weighed by Soft Core CPI- Support at Risk on Dovish Fed

USDOLLAR Weighed by Soft Core CPI- Support at Risk on Dovish Fed

2015-09-16 16:50:00
David Song, Strategist
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Talking Points:

- USDOLLAR Struggles Ahead of Fed Amid Subdued Price Growth.

- GBP/USD Rallies to Fresh Monthly High on Faster Wage Growth, Hawkish BoE.

- NZD/USD Rebound Vulnerable to Widening New Zealand Trade Deficit.

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11961.87

12005.15

11949.98

-0.31

99.64%

USDOLLAR Weighed by Soft Core CPI- Support at Risk on Dovish FedUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar struggles to hold its ground ahead of the Federal Open Market Committee (FOMC) interest rate decision as the U.S. Consumer Price Index (CPI) comes in short of market forecast, with the core rate holding steady at an annualized 1.8%.
  • With narrowing expectations for a September rate hike, the fresh updates (growth, inflation & interest rate) coming out of the central bank is likely to drive future price action as market participants gauge the prospects for a 2015 liftoff.
  • Failure to close below 11,951 (38.2% expansion) to 11,965 (23.6% retracement) may generate range-bound prices ahead of the Fed rate decision.

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USDOLLAR Weighed by Soft Core CPI- Support at Risk on Dovish Fed

GBP/USD

GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the 1.2K increase in U.K. Jobless Claims, GBP/USD climbs back aboveformer support around 1.5460 (23.6% retracement) amid signs of stronger wage growth, while the Bank of England (BoE) remains upbeat on the economy and points to external factors as the key condition for the delayed normalization cycle.
  • With U.K Retail Sales projected to increase another 0.1% in August, signs of a stronger recovery may heighten the appeal of the sterling as a growing number of central bank officials adopt a hawkish outlook for monetary policy.
  • DailyFX Speculative Sentiment Index (SSI)shows retail crowd remains net-long GBP/USD since August 21, but the ratio remains off of recent extremes as it narrows to +1.41, with 59% of traders long.

NZD/USD

NZD/USD Daily Chart
  • Despite the recent series of higher highs & lows, the failed attempts to close above 0.6370 (50% retracement) to 0.6400 (61.8% retracement) may spur a near-term decline in NZD/USD as New Zealand’s 2Q Gross Domestic Product (GDP) report is expected to show the economy growing an annualized 2.5% following the 2.6% during the first three-months of 2015.
  • Signs of a slowing recovery may reinforce expectations for further monetary support, with market participants increasing bets for another rate cut at the October 29 policy meeting.
  • The long-term bearish outlook favors the approach to sell-bounces in NZD/USD, with a break of the monthly opening range raising the risk for a more meaningful decline in the exchange rate.

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Read More:

Price & Time: Gold Move Signaling Fed Disappointment?

AUDJPY Approaching Monthly Open- Range Break to Determine Scalp Bias

--- Written by David Song, Currency Analyst

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

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