GBP/USD Fails to Breakout on BoE Minutes- NZD to Face RBNZ

Talking Points:

- GBP/USD Risks Range-Bounce Prices as Triangle/Wedge Formation Remains in Play.

- NZD/USD Preserves Downward Trending Channel Ahead of RBNZ Rate Decision.

- USDOLLAR Pares Decline as U.S. Existing Home Sales Beats Market Expectations.

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GBP/USD

Chart - Created Using FXCM Marketscope 2.0

• British Pound outperforms as the Bank of England (BoE) Minutes highlights the growing risk for inflation; may see a greater dissent over the coming months as an increased number of central bank officials adopt a more hawkish tone for monetary policy.
• Nevertheless, the lack of momentum to close above near-term resistance around 1.5630 (38.2% retracement) to 1.5650 (38.2% expansion) may generate range-bound prices over the remainder of the week amid the narrowing race between the BoE & Fed to normalize monetary policy.
• The DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long GBP/USD since July 1, but the ratio has come off of recent extremes as it sits at 1.31, with 57% of traders long.

NZD/USD

• Failure to retain the bearish RSI momentum may highlight a near-term bottoming process in NZD/USD, but may see a continuation of the downward trend as the Reserve Bank of New Zealand (RBNZ) is widely expected to reduce the official cash rate by another 25bp to 3.00%.
• However, a material shift in the forward-guidance for monetary policy along with a softening of the verbal intervention may spark a larger correction in the exchange rate should the central bank highlight an end of its easing cycle.
• Will keep a close eye on the 20-Day SMA (0.6686) for near-term resistance as it lines up nicely with channel resistance, while the key downside region of interest comes in around 0.6370 (50% retracement) to 0.6400 (61.8% retracement).

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USDOLLAR(Ticker: USDollar):

Chart - Created Using FXCM Marketscope 2.0

• Dow Jones-FXCM U.S. Dollar rebounds from a fresh weekly low (11,985) following the better-than-expected U.S. data prints, but the lack of momentum to hold above the 10-Day SMA (11,994) may generate a larger pullback.
• Fundamental developments highlighting a stronger U.S. recovery should continue to favor a long-term bullish outlook for the greenback along with the approach to buy-dips in the dollar amid growing speculation for a September Fed liftoff.
• Will keep a close eye on 11,898 (50% retracement) to 11,901 (78.6% expansion) on the back of a larger pullback as we’re still waiting on a close above 12,049 (78.6% retracement) to see a resumption of the upward trend.

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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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