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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.

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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).
  • 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):





Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index






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:

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--- Written by David Song, Currency Analyst

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

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