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GBP/USD Retail Crowd Remains Long Ahead of UK/US GDP Reports

GBP/USD Retail Crowd Remains Long Ahead of UK/US GDP Reports

2015-12-21 17:55:00
David Song, Strategist
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Talking Points:

- GBP/USD Retail Crowd Remains Net-Long Even as Pair Sits at Monthly Low.

- Gold (XAU/USD) Risks Larger Recover as RSI Carves Bullish Formation.

- USDOLLAR December Range in Focus Ahead of Final 3Q GDP Report.

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GBP/USD

GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Longer-term outlook for GBP/USD remains tilted to the downside as price & the Relative Strength Index (RSI) preserve the bearish formations from earlier this year; may see the Bank of England (BoE) further delay its normalization cycle amid the ongoing 8 to 1 split within the central bank.
  • Even though the final U.K. Gross Domestic Product (GDP) report is anticipated to show the economy growing an annualized 2.3%, BoE Governor Mark Carney may largely endorse a wait-and-see approach in the year ahead as the committee sees inflation holding below 1% until Spring 2016.
  • Despite the recent decline in the exchange rate, the DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long since November 19, with the ratio sitting a recent extremes as it holds at +2.10, with 67% of traders now long.

XAU/USD

XAU/USD Daily Chart
  • Gold prices may track higher over the remainder of 2015 as the RSI comes off of oversold territory and carves a bullish pattern from the November low but, the long-term outlook remains tilted to the downside as the precious metal rebounds from a lower-low.
  • Despite the near-term rebound, the disinflationary environment across the major industrialized economies accompanied by rising U.S. interest rates may further sap the outlook for gold prices as it largely moves in tandem with other precious metals.
  • Break/close above $1,079 (50% retracement) to $1,080 (23.6% retracement) may highlight a larger correction, with the next hurdle coming in around $1,101 (38.2% retracement) to $1,103 (78.6% expansion).

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

12138.65

12160.75

12131.97

-0.10

52.53%

GBP/USD Retail Crowd Remains Long Ahead of UK/US GDP ReportsUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the limited market reaction to the data prints from earlier this morning, the USDOLLAR may continue to give back the advance following the Federal Open Market Committee (FOMC) rate-hike as the greenback preserves the monthly opening range.
  • With the final 3Q Gross Domestic Product (GDP) report expected to show a downward revision in the growth rate to an annualized 1.9%, signs of a slower recovery may produce near-term headwinds for the reserve currency as it drags on interest rate expectations.
  • Will keep a close eye on the near-term range for the USDOLLAR, with near-term support coming in around 12,049 (78.6% retracement) to 12,082 (61.8% expansion).
GBP/USD Retail Crowd Remains Long Ahead of UK/US GDP Reports

*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

Read More:

Price & Time: USDOLLAR - Negative December Seasonality A Dud?

DAX 30: The Euro, the Force Is Strong With This One

USD/JPY Risks Larger Pullback on Dismal US GDP, Sticky Japan CPI

Canadian Dollar Hits 11-yr Low vs. USD on Wholesales Trade Data Miss & Macro Factors

--- Written by David Song, Currency Analyst

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

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