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  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/s4lZWdJoXV
  • The US Dollar Index traded higher last week, sustaining its broader uptrend. Conflicting technical signals urge caution, but the directional bias remains skewed to the upside. Get your weekly USD technical forecast from @FxWestwater here: https://t.co/jcwhcsUBEN https://t.co/tKrlrRZlZn
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  • The Australian Dollar still remains vulnerable as it extends losses against its major counterparts. What is the road ahead for AUD/USD, AUD/JPY, AUD/NZD and AUD/CAD? Get your AUD technical forecast from @ddubrovskyFX here: https://t.co/ph20zFv4qS https://t.co/v4g9ATf4rr
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  • Gold price action is primed for volatility next week with the Fed decision on deck. How real yields and the US Dollar react to fresh guidance from Fed officials will be key for gold outlook. Get your weekly gold forecast from @RichDvorakFX here: https://t.co/MzaIl7tPmZ
AUD/USD Rebound to Benefit from Sticky Australia CPI

AUD/USD Rebound to Benefit from Sticky Australia CPI

David Song, Strategist

Talking Points:

- AUD/USD Threatens Near-Term Resistance Ahead of Australia CPI Report.

- GBP/USD Rebound Vulnerable to Lackluster 4Q U.K. GDP Print.

- USDOLLAR Risks Larger Pullback Ahead of FOMC Rate Decision.

For more updates, sign up for David's e-mail distribution list.

AUD/USD

AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Longer-term outlook for AUD/USD remains tilted to the downside as price & the Relative Strength Index (RSI) preserve the bearish formations carried over from the previous here, but the pair may stage a larger rebound ahead of the Reserve Bank of Australia (RBA) interest rate decision on February 2 as the oscillator continues to come off of oversold territory.
  • With Australia’s Consumer Price Index (CPI) anticipated to show a pickup in the headline as well as the core rate of inflation, signs of stronger price growth may keep a the RBA on the sidelines even though Governor Glenn Stevens keeps the door open to further insulate the real economy.
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long AUD/USD since January 5, but the ratio remains off of recent extremes as it sits at +1.38 as 58% of traders are now long.

GBP/USD

GBP/USD Daily Chart
  • GBP/USD looks poised for a larger rebound as the RSI breaks out of the bearish formation from back in December, with the oscillator finally climbing out of oversold territory; stands at risk of carving a lower-high in the long-term series as it preserves the bearish formation from 2015.
  • With the 4Q U.K. Gross Domestic Product (GDP) report expected to show the growth rate increasing an annualized 1.9% following the 2.1% expansion during the three-months through September, a marked slowdown may dampen the appeal of the sterling as it dampens bets for a Bank of England (BoE) rate hike in 2016.
  • Will watch former support zones for new resistance, with a close above 1.4350 (23.6% retracement) to open up the next topside objective around 1.4500 (78.6% expansion) to 1.4520 (38.2% retracement).

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

12243.89

12281.05

12239.72

-0.21

113.01%

AUD/USD Rebound to Benefit from Sticky Australia CPIUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR may continue to congest ahead of the Federal Open Market Committee (FOMC) interest rate decision as it retains the range-bound price action from the previous month, while the RSI comes off of overbought territory.
  • With the 2016 rotation, will keep a close eye on the vote-count as Chair Janet Yellen pledges to implement higher borrowing-costs over throughout the year; may take a similar approach to the European Central Bank (ECB) as the Fed is scheduled to release its updated forecasts at the March meeting.
  • With the USDOLLAR capped around around 12,273 (161.8% expansion) to 12,296 (100% expansion), will keep a close eye on former resistance around 12,176 (78.6% expansion) to 12,219 (November high) for new support.
AUD/USD Rebound to Benefit from Sticky Australia CPI

Read More:

USD/CAD: Just a Minor Setback?

Oil Collapse Driven by Panic; Is CAD at a Policy Turning Point?

WTI Crude Oil Price Forecast: Largest 2-Day Rally since 2008 Lacks Follow through (Levels)

COT-Trend Traders Hold Record Net Short Position in Copper

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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