Talking Points:
- GBP/USD to Face Further Losses on Dovish Bank of England (BoE) Testimony.
- USDOLLAR Remains Capped Despite Strong CPI- Fed Speeches in Focus.
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Chart - Created Using FXCM Marketscope 2.0
- GBP/USD gapped lower, with the exchange rate tumbling to a fresh 2016 low of 1.4056 as U.K. Prime Minister David Cameron schedules the referendum for June 23; the British Pound stands at risk of facing additional headwinds over the coming weeks/months amid growing support to leave the European Union.
- With the Bank of England (BoE) scheduled to testify in front of the Parliament’s Treasury Select Committee, dovish comments from Governor Mark Carney and Co. may spur a further decline in GBP/USD as market participants push back bets for a rate-hike.
- With the Relative Strength Index (RSI) largely preserving the bearish formation carried over from 2015, the long-term downward trend in the pound-dollar may continue to assert itself over the coming days as the outlook for monetary & fiscal policy remains clouded with high uncertainty.
- The DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long GBP/USD since November 19, with the ratio hitting an extreme in January as the figure pushed above the +3.00 mark.
- Despite the gap lower, the ratio remains near extremes as it upticks to +2.15, with 68% of traders now long.
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USDOLLAR(Ticker: USDollar):
| Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
|---|---|---|---|---|---|
| DJ-FXCM Dollar Index | 12101.94 | 12131.7 | 12076.98 | 0.38 | 82.95% |
Chart - Created Using FXCM Marketscope 2.0
- Despite the mixed data prints coming out of the U.S. economy, the USDOLLAR may mount a larger recovery in the days ahead as Fed officials remain upbeat and suggest the central bank remains on course to further normalize monetary policy over the coming months.
- A downward revision in the preliminary 4Q Gross Domestic Product (GDP) report may produce near-term headwinds for the greenback as it highlights a slowing recovery, but the fresh comments from Fed Vice-Chair Stanley Fisher, Governor Jerome Powell and Governor Lael Brainardmay boost the appeal of the greenback should the voting-members endorse higher borrowing-costs for 2016.
- Will keep a close eye on the RSI as it appears to be threatening the bearish formation from earlier this year, with the topside level of interest coming in around 12,176 (78.6% expansion) to the 12,200 pivot.
Read More:
EUR/USD – Bullish Views Getting Put to the Test
Constructive Copper Pattern adds to AUD/USD Intrigue
USD/JPY Technical Analysis: Best 2-Week Run For JPY Since 1998
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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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