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GBP/USD Retail Longs Narrow 23% Ahead of Bank of England Testimony

GBP/USD Retail Longs Narrow 23% Ahead of Bank of England Testimony

2016-03-07 17:55:00
David Song, Strategist
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Talking Points:

- GBP/USD Retail Longs Narrow 23% Ahead of Bank of England (BoE) Testimony.

- USDOLLAR Continues to Carve Bearish Pattern Ahead of Fed Speeches.

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

GBP/USD

GBP/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • After carving a lower-lower at the end of February, the long-term downward trend in GBP/USD may reassert itself over the coming days/weeks as the pair struggles to push back above former support around 1.4240 (38.2% expansion) to 1.4300 (78.6% retracement).
  • With the Bank of England (BoE) scheduled to speak on the U.K.’s EU-membership on March 8, the fresh comments coming out of the Parliament hearing may produce additional headwinds for the British Pound should Governor Mark Carney & Co. largely endorse a wait-and-see approach and adopt a more dovish outlook for monetary policy.
  • Still keeping a close eye on the gap from February 22 as GBP/USD has yet to fill the move on a close-basis, with the next key topside region of interest coming in around 1.4660 (61.8% expansion) to 1.4700 (61.8% retracement).
GBP/USD SSI
  • Despite the decline in GBP/USD, the DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long GBP/USD since November 19, with the ratio hitting an extreme in January as it climbed above the +3.00 mark.
  • Retail sentiment remains off of extremes as the ratio currently sits at +1.54, with long positions narrowing 23.3% from the previous week.

Why and how do we use the SSI in trading? View our video and download the free indicator here

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

12035.87

12091.15

12032.78

-0.17

108.10%

GBP/USD Retail Longs Narrow 23% Ahead of Bank of England TestimonyUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The USDOLLAR remains at risk of extending the decline from earlier this month as it continues to carve a series of lower highs & lows, while the Relative Strength Index (RSI) appears to be carving a bearish formation in 2016.
  • Will keep a close eye on the fresh rhetoric from Fed Vice-Chair Stanley Fischer and Governor Lael Brainard as the Federal Open Market Committee (FOMC) is widely anticipated to retain its current policy at the March 16 interest rate decision.
  • Failure to hold above the 2016 low (12,001) may open up the next downside targets around 11,986 (61.8% retracement) following by 11,965 (23.6% retracement).
GBP/USD Retail Longs Narrow 23% Ahead of Bank of England Testimony

Read More:

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DailyFX Technical Focus: Nikkei 225 at Resistance

USD/JPY Technical Analysis: The Core FX Pair In The Risk ParadigmUSDOLLAR: Key Levels to Know Heading into NFPs, March Open

Get our top trading opportunities of 2016 HERE

--- Written by David Song, Currency Analyst

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

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