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GBP/USD Retail Shorts Jump, Open Interest Rises Going Into EU Summit

GBP/USD Retail Shorts Jump, Open Interest Rises Going Into EU Summit

2016-02-18 19:45:00
David Song, Currency Strategist
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Talking Points:

- GBP/USD Retail Shorts Jump, Open Interest Rises Going Into EU Summit.

- USDOLLAR to Pare Losses on Sticky CPI, Upbeat Fed Rheotric.

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GBP/USD

GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • With market participants turning their attention to the EU Summit, the near-term bounce in GBP/USD may quickly fizzle should the U.K. fail to strike a deal; even though the Relative Strength Index (RSI) threatens the bearish formation from May, the triangle/wedge formation (continuation pattern) may lead to a further decline as the pair largely retains the downward trend carried over from the previous year.
  • Nevertheless, an agreement to keep the U.K. within EU may fuel a larger recovery in the exchange rate especially as Bank of England (BoE) Deputy Governor Jon Cunliffe highlights stretched market speculation and argues against the material shift in interest-rate expectations.
  • In light of bounce, would need to see GBP/USD climb/close back above 1.4510 (23.6% retracement) to 1.4520 (38.2% retracement) to favor a larger advance in the days ahead.
GBP/USD SSI
  • The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long GBP/USD since November 19, with positioning hitting an extreme in January as the ratio climbed above +3.00.
  • Despite the recent pickup in the SSI, the ratio has come off of recent extremes as it narrows to +1.82, with current figures highlighting a 15.4% jump in short positions from the previous week.

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

12092.89

12108.99

12079.89

0.01

45.53%

GBP/USD Retail Shorts Jump, Open Interest Rises Going Into EU SummitPlease add a description for the image.

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR stands at risk for a further decline as the RSI preserves the bearish formation from earlier this year, while Fed officials appear to be adopt a more cautious outlook as St. Louis Fed President James Bullard warns that it will be ‘unwise to continue a normalization strategy in an environment of declining market-based inflation expectations.’
  • The U.S. Consumer Price Index (CPI) may prop up the greenback as the report is anticipated to show sticky price growth, but dovish comments from Cleveland Fed President Loretta Mester, a 2016 voting-member, may dampen the appeal of the dollar as market participants push out bets for the next rate-hike.
  • Will keep a close eye on the monthly rate as the USDOLLAR consolidates ahead of the last full-week of February, with the next downside region of interest coming in around 11,986 (61.8% retracement).
GBP/USD Retail Shorts Jump, Open Interest Rises Going Into EU Summit

Read More:

EUR/USD – Breakout Hangs in the Balance

USD/JPY Technical Analysis: Best 2-Week Run For JPY Since 1998

Crude Oil Turn in the Pipeline?

USD/JPY - The Abenomics Test

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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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