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Cable Continues to Search for Support- FX Position Back at Extreme

Cable Continues to Search for Support- FX Position Back at Extreme

2016-01-12 18:20:00
David Song, Strategist
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Talking Points:

- GBP/USD Retail Position Back at Extremes as Pair Continues to Search for Support.

- AUD/USD Vulnerable to Further Losses on Narrowing China Trade Surplus.

- USDOLLAR Breaks Out Despite Mixed Data- Fed’s Beige Book on Radar.

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GBP/USD

GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • GBP/USD extends the decline from earlier this week as U.K. Industrial & Manufacturing unexpectedly contracts in November; with the Relative Strength Index (RSI) pushing deeper into oversold territory, downside targets remain in focus with the next region of interest coming in around 1.4290 (78.6% retracement) to 1.4310 (61.8% expansion).
  • Even though the Bank of England (BoE) interest rate decision is likely to reveal another 8-1 split within the central bank, the fresh comments may halt the near-term selloff in the sterling should the Monetary Policy Committee (MPC) show concerns surrounding the marked decline in the exchange rate.
  • 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 +2.86, with 74% of traders now long.

AUD/USD

AUD/USD Daily Chart
  • AUD/USD appears to have made a failed attempt to test the September low (0.6906) as the pair holds within the previous day’s range, while the RSI holds above oversold territory.
  • However, as China – Australia’s largest trading partner – is anticipated to show a narrowing trade surplus in November, the weakening outlook for global trade may dampen the appeal of the Australian dollar as it puts increased pressure on the Reserve Bank of Australia (RBA) to further insulate the real economy.
  • Will watch former support around 0.7080 (38.2% expansion) to 0.7090 (78.6% retracement) for new resistance, with the next downside targets coming in around 0.6830 (161.8% expansion) to 0.6860 (61.8% expansion).

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

12229.25

12245.49

12197.3

0.22

134.36%

Cable Continues to Search for Support- FX Position Back at ExtremeUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite the mixed batch of data coming out of the U.S. economy, the USDOLLAR may extend the advance from earlier this month and looks poised for another leg higher as it breaks out of the range carried over from November; will keep a close eye on the RSI as it approaches overbought territory.
  • More of the same from the Fed’s Beige Book may spur a limited market reaction as the U.S. economy approaches full employment, but greater concerns surrounding the inflation outlook may dampen the appeal of the dollar as it drags on interest rate expectations.
  • Topside targets around 12,273 (161.8% expansion) to 12,296 (100% expansion) are on the radar as the dollar appears to be coiling for a move higher.
Cable Continues to Search for Support- FX Position Back at Extreme

Read More:

USD/CAD Technical Analysis: Multiple Major Targets Hit This Morning

Price & Time: NZD/USD: Starting Down or Bullish Backtest?

WTI Crude Oil Price Forecast: The Unthinkable $30 Level Approaches

Bearish EURUSD: Eyeing New 2016 Lows

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the "Traits of Successful Traders" series.

--- Written by David Song, Currency Analyst

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

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