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GBP/USD Retail FX Positioning Continues to Narrow From Extremes

GBP/USD Retail FX Positioning Continues to Narrow From Extremes

David Song,

Talking Points:

- GBP/USD Retail Positioning Narrows from Extreme Ahead of U.K. CPI Report.

- AUD/USD Continues to Carve Bullish Formation Ahead of China Trade Balance.

- USDOLLAR Extends Decline Even as Fed’s Fischer, Lockhart Endorse 2015 Liftoff.

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GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Even though the headline reading for the U.K. Consumer Price Index (CPI) is expected to hold flat for the second consecutive month in September, and uptick in the core rate of inflation may spur a bullish reaction in GBP/USD as it puts increased pressure on the Bank of England (BoE) to normalize monetary policy sooner rather than later.
  • Will also keep a close eye on the key speeches by BoE board member Ian McCafferty & Andrew Haldane as the central bank sees inflation holding below 1% until Spring 2016.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long GBP/USD since August 21, but the ratio continues to come off of recent extremes as it narrows to +2.09, with 68% of traders long.


AUD/USD Daily Chart
  • AUD/USD may extend the advance from the earlier this month as it continues to carve a series of higher highs & lows, while the Relative Strength Index (RSI) pushes into overbought territory.
  • With China – Australia’s largest trading partner – expected to show a narrowing surplus in September, a dismal development may dampen the appeal of the higher-yielding currency amid the weakening outlook for global growth.
  • A break/close above 0.7380 (50% retracement) to 0.7390 (78.6% expansion) should expose the next topside region of interest around 0.7490 (61.8% retracement) to 0.7500 (61.8% expansion).

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Read More:

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11918.3611943.1311913.55-0.1959.23%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar extends the decline from the previous week even as Fed Vice-Chair Stanley Fischer and Atlanta Fed President Dennis Lockhart continue to endorse a 2015 rate hike; will continue to watch the downside targets amid the bearish formation that continues to take shape.
  • Even though the Fed stands ready to normalize monetary policy later this year, the ‘data dependent’ central bank may look to buy more time as the outlook for growth and inflation remains tilted to the downside; Advance Retail Sales & the Consumer Price Index (CPI) may heavily impact the Fed outlook ahead of the October 28 interest rate decision amid the mixed data prints coming out of the U.S. economy.
  • Will keep a close eye around 11,898 (50% retracement) to 11,901 (78.6% expansion) amid the ongoing string of lower highs & lows.

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--- Written by David Song, Currency Analyst

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

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