GBP/USD Extends Bearish Series Despite Hawkish BoE

2017-02-07 16:20:00

Talking Points:

- NZD/USD Fails to Test November High (0.7403) Ahead of RBNZ Rate Decision.

- GBP/USD Extends Bearish Series Despite Hawkish BoE; Governor Carney on Tap.

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
NZD/USD	0.7309	0.7376	0.7279	12	97

NZD/USD Daily

Chart - Created Using Trading View

Despite the 1.3% advance in the Global Dairy Trade (GDT) Price Index, NZD/USD snaps back from a fresh 2017 high of 0.7375, with the lack of momentum to test the November high (0.7403) raising the risk for a near-term exhaustion; the string of failed attempts to close above the Fibonacci overlap around 0.7330 (38.2% retracement) to 0.7350 (61.8% expansion) may open up the downside targets especially as the Relative Strength Index (RSI) still responds to the bearish formation carried over from the summer months.
With Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler scheduled to step down in September, the central bank may stick with the status quo throughout 2017 as Grant Spencer will fulfill the role of acting governor from September 27 to March 18; in turn, the kiwi-dollar may carve a longer-term series of lower highs & lows as it largely preserves the downward trending channel from September.
Will keep a close on the monthly opening range, with a break/close below 0.7240 (61.8% retracement) opening up the next downside area of interest around 0.7200 (38.2% retracement) followed 0.7100 (38.2% expansion).

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
GBP/USD	1.2435	1.2487	1.2347	34	140

GBP/USD Daily

Chart - Created Using Trading View

GBP/USD extends the recent series of lower highs & lows while Bank of England (BoE) board member Kristin Forbes highlights a hawkish outlook for monetary and warns the central bank may have to raise the benchmark interest rate ‘even if it means reversing recent adjustments;’ the near-term outlook for GBP/USD remains tilted to the downside following the failed run at the December high (1.2775), but the pound-dollar may continue to track the range carried over from late-2016 as the Monetary Policy Committee (MPC) appears to be on course to move away from its easing-cycle.
With BoE Governor Mark Carney scheduled to speak on Thursday, another batch of hawkish rhetoric may limit the downside risk for sterling as the central bank persistently warns ‘there are limits to the extent that above-target inflation can be tolerated,’ but the British Pound remains at risk of facing headwinds throughout 2017 as the U.K.’s departure from the European Union (EU) clouds the economic outlook.
A close below the Fibonacci overlap around 1.2460 (61.8% expansion) to 1.2490 (38.2% retracement) may open up the next downside target around 1.2270 (23.6% retracement) followed by 1.2100 (61.8% expansion).

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The DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long GBP/USD since February 2, with sentiment hitting a 2017-extreme of +3.45 during the previous month, while traders have been net-short NZD/USD since January 12.
GBP/USD SSI sits at +1.75 as 64% of traders are long, with long positions 15.6% higher from the previous week, while open interest stands 4.3% above the monthly average.
NZD/USD SSI sits at -1.75 as 36% of traders are long, with long positions 16.3% higher from the previous week, while open interest stands 6.6%b above the 30-day average.
As NZD/USD SSI narrows from a recent extreme of -2.51, may see a further adjustment in retail positioning should the kiwi-dollar struggle to preserve the advance from earlier this year.

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