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GBP/USD Retains Bullish RSI Formation Even as BoE Stays on Hold

GBP/USD Retains Bullish RSI Formation Even as BoE Stays on Hold

David Song, Strategist

Talking Points:

- GBP/USD Preserves Bullish RSI Formation Even as BoE Retains Current Policy.

- USDOLLAR Remains Capped Ahead of U.S. Retail Sales, U. of Michigan Confidence.

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

  • GBP/USD may make a more meaningful attempt to break out of the downward trend carried over from August as it appears to be carving a higher-low in May, while the Relative Strength Index (RSI) largely preserves the bullish formation from earlier this year.
  • Even though the BoE votes unanimously to retain the current policy and trims its growth forecast for 2016, Governor Mark Carney & Co. may look to normalize monetary policy sooner rather than later as the central bank continues to see a risk of overshooting the 2% inflation target over the policy horizon.
  • A move back above 1.4620 (50% expansion) to 1.4660 (50% retracement) may open up the topside targets, with the first region of interest coming in around 1.4800 (61.8% retracement) followed by 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion).
GBP/USD SSI
  • The DailyFX Speculative Sentiment Index (SSI) is showing increased volatility in retail positioning, with the FX crowd flipping back net-long GBP/USD following the BoE rate decision.
  • The ratio currently sits at +1.19 as 54% of traders are long, with long positions 9.3% higher from the previous week, while open interest stands 3.7% above the monthly average.

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

USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

11898.80

11910.2

11870.25

0.24

68.78%

GBP/USD Retains Bullish RSI Formation Even as BoE Stays on HoldUSDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The near-term rebound in the USDOLLAR appears to be getting exhausted amid the ongoing failed attempts to close above 11,898 (50% retracement); may see the downward trend from earlier this year reassert itself as Fed Fund Futures continue to show a less than 10% probability for a Fed rate-hike in 2016.
  • A rebound in U.S. Advance Retail Sales accompanied by a pickup in the U. of Michigan Confidence survey may spur a bullish reaction in the greenback, but the data may largely fail to spur a material shift in interest-rate expectations as Fed officials remain in no rush to implement higher borrowing-costs.
  • Signs of a near-term top may open up the downside, with the a break/close below 11,836 (61.8% retracement) to 11,843 (38.2% retracement) raising the risk for a move back towards 11,745 (50% retracement) to 11,759 (23.6% retracement).
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Read More:

Record Trend Following Long Position in Gold

AUD/CAD Into Key Support- Monthly Opening Range In Focus

US Dollar Bear Trap within an Even Bigger Bull Trap?!

USD/JPY Technical Analysis: Has It Bottomed?

--- Written by David Song, Currency Analyst

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

To be added to David's e-mail distribution list, please follow this link.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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