Talking Points:
- GBP/USD Searches for Support as U.K. Data Points to Slowing Recovery.
- EUR/USD Outlook Mired by Bets for Additional ECB Easing- Will President Draghi Disappoint?
- USDOLLAR Pares Losses as ADP Employment Boosts NFP Expectations.
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Chart - Created Using FXCM Marketscope 2.0
- GBP/USD extends the decline from the previous month as the Purchasing Manager Indices (PMI) figures coming out of the U.K. highlight s slowing recovery and raises the risk for the Bank of England (BoE) to further delay its normalization cycle.
- Even though the BoE remains on course to normalize monetary policy, GBP/USD may continue to give back the rebound from back in April (1.4565) as the pair carves a downward trending channel, while the Relative Strength Index (RSI) preserves the bearish formation from back in May.
- The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long GBP/USD since November 19, but the ratio appears to be working its way back towards recent extremes as it climbs to +1.65, with 62% of traders now long.
EUR/USD
- The long-term outlook for EUR/USD remains tilted to the downside as the European Central Bank (ECB) stands ready & willing to further embark on its easing cycle, with the April (1.0519) and March low (1.0461) largely in focus.
- Despite the dovish pledge by ECB President Mario Draghi, the euro-dollar stands at risk of a short-squeeze as market participants look for an adjustment to the quantitative easing (QE) program accompanied by another reduction in the central bank’s deposit-rate.
- With market participants heavily looking for a major announcement from the ECB, a disappointing interest rate decision may spur a move back towards former-support zones, with the key region of interest coming in around 1.1090 (50% retracement).
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12197.43 | 12212.22 | 12148.23 | 0.39 | 170.84% |
Chart - Created Using FXCM Marketscope 2.0
- USDOLLAR pares the decline from earlier this week as ADP Employment expands 217K in November and boosts expectations for a strong Non-Farm Payrolls (NFP) report; may see the greenback coil for a move higher amid speculation for a December Fed rate-hike.
- Beyond the Fed’s Beige Book, Chair Janet Yellen’s testimony before the congressional Joint Economic Committee may boost the appeal of the greenback should the central bank head continue to endorse a 2015 liftoff ahead of the December 16 interest rate decision.
- Topside targets remain in focus for the USDOLLAR, with the Fibonacci overlap around12,273 (161.8% expansion) to 12,296 (100% expansion) up next.
*As we approach the holidays and thus illiquid markets, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."
Three Factors Warn of Perfect Storm in FX Markets - Caution Advised
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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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