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GBP/USD Clears Near-Term Range Ahead of U.K. Retail Sales Report
DailyFX.com -
Talking Points:
- GBP/USD Clears Near-Term Range Ahead of U.K. Retail Sales Report.
- USDOLLAR Bid Ahead of FOMC Minutes as Fed Officials Endorse Higher Borrowing-Costs.
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GBP/USD
Chart - Created Using FXCM Marketscope 2.0
Despite the limited market reaction to the U.K. Jobless Claims report, GBP/USD breaks out of the near-term range and threatens the downward trend carried over from August as fresh opinion polls show a narrowing risk for an EU-break up.
With U.K. Retail Sales projected to rebound 0.6% in April, signs of a stronger-than-expected recovery may fuel the near-term advance in GBP/USD and put increased pressure on the Bank of England (BoE) to normalize monetary policy sooner rather than later as private-sector consumption remains one of the leading drivers of growth and inflation.
A close above 1.4520 (38.2% retracement) may open up the next topside target around 1.4620 (50% expansion) to 1.4660 (50% retracement), followed by 1.4800 (61.8% retracement).
The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long GBP/USD since the last BoE rate-decision on May 12, with the ratio marking near-term extremes in March as it climbed towards +2.50.
The ratio currently sits at +1.15 as 54% of traders are long, while long positions have narrowed 5.3% from the previous week, with open interest 0.4% 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 | 11915.43 | 11952.8 | 11913.22 | 0.01 | 73.25% |
Chart - Created Using FXCM Marketscope 2.0
The USDOLLAR pares the decline from earlier this week as Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams see scope for at least two rate-hikes in 2016, with Fed Fund Futures now showing an 18% probability for a rate-hike at the June meeting.
Nevertheless, the Federal Open Market Committee (FOMC) Minutes may have a limited impact on interest-rate expectations as the majority of the 2016 voting-members endorse a wait-and-see approach, and more of the same language from central bank officials may produce a choppy market reaction as Fed Chair Janet Yellen remains in no rush to implement higher borrowing-costs.
Still waiting for a closing price below 11,898 (50% retracement) to open up the next downside region of interest coming in around 11,836 (61.8% retracement) to 11,843 (38.2% retracement) as the USDOLLAR remains largely capped by the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement).
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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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