Talking Points:
- GBP/USD November Rebound at Risk on Dovish BoE Testimony.
- USD/JPY Advance to Gather Pace on Slowing Japan Consumer Price Index (CPI).
- USDOLLAR Bull-Flag Takes Shape Ahead of 3Q GDP Report.
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Chart - Created Using FXCM Marketscope 2.0
- GBP/USD remains at risk of giving back the rebound from earlier this month as the pair appears to have cared another lower-high in November, while the Relative Strength Index (RSI) retains the bearish formation from back in May; break of the monthly low(1.5026) may expose the next downside region of interest around 1.4920 (61.8% retracement() to 1.4930 (38.2% expansion).
- With the Bank of England (BoE) scheduled to testify on its quarterly inflation report (QIR), dovish comments from Governor Mark Carney and Co. may produce a further decline in the exchange rate as the central bank sees U.K. inflation holding below 1% until Spring 2016.
- The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long GBP/USD since November 19, with the ratio advancing to +1.16 as 54% of traders are now long.
USD/JPY
- Long-term outlook for USD/JPY remains tilted to the upside amid the deviating paths for monetary policy, but the Bank of Japan (BoJ) Minutes may have a limited impact in weakening the Yen as Governor Haruhiko Kuroda and Co. remains in no rush to further embark on its easing cycle.
- Will continue to favor the approach of looking for opportunities to ‘buy-dips’ in USD/JPY as price & RSI retain the upward trend, while Japan’s Consumer Price Index (CPI) may put increased pressure on the BoJ to expand its asset-purchase program amid expectations for a downtick in the core-core rate of inflation.
- Waiting for a break/close above 123.75 (50% expansion) to open up the next topside region of interest around 124.30 (161.8% expansion).
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12177.84 | 12188.74 | 12155.61 | 0.22 | 75.81% |
Chart - Created Using FXCM Marketscope 2.0
- Despite the weaker-than-expected data coming out of the U.S. economy, the USDOLLAR appears to be carving out a bull-flag pattern amid expectations for a December Fed rate-hike; will retain a constructive outlook on the greenback as the continuation pattern takes shape.
- With the advance U.S. 3Q Gross Domestic Product (GDP) report expected to show an upward revision in the growth rate to reflect a 2.1% expansion, signs of a stronger recovery may boost the appeal of the greenback as Fed Chair Janet Yellen remains confident in achieving the 2% inflation target over the policy horizon.
- Will continue to watch the topside targets around12,273 (161.8% expansion) to 12,296 (100% expansion) as the USDOLLAR holds above former resistance around 12,049 (78.6% retracement) to 12,082 (61.8% expansion, will retain a constructive outlook for the greenback, with the next topside hurdles coming in around.
Read More:
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USD/JPY Technical Analysis: Shaken, Not Stirred Above 122
Draghi’s Dovish Reminder Keeps EUR/USD Downtrend Intact
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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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