USD Leaves Markets In Suspense

This is our look at cable ahead of the FOMC meeting:

As price met resistance in the zone between the 1.4750 and 1.4800 levels, momentum exhausted in like fashion to move into bearish territory. The U.S. dollar looks to accelerate weakness after another disappointing non-farm payrolls report was released last week. This weak jobs report should have been evident in the midst of all the weak U.S. economic data that had been released prior, namely the weak GDP number, the weak retail sales, the weak manufacturing numbers and the weak inflation numbers. The weight of evidence points to a weaker U.S. economy. Many market participants would begin to think that all of the weak economic data out of the U.S. would now start to weaken the U.S. dollar more substantially. If markets begin to sell the U.S. dollar en masse, the $GBPUSD will move back towards the 1.4769 highs for a break higher to the major 1.5000-psychological level. However, this will not be the scenario that plays out. The market will begin buying U.S. dollars in anticipation of an interest rate hike by the Federal Reserve later this year. The Friday close below the 1.4350-support level signals a move to the bottom of the range at 1.4000.

GBPUSD DAILY CHART

The event risk of the week for the U.S. dollar is the Federal Reserve monetary policy announcement. In response to the disappointing U.S. jobs reports, markets have already discounted this month’s Federal Reserve monetary policy meeting as a non-event. Rather, markets have begun to price in an interest rate hike at the July meeting. Market participants will, therefore, be keen to hear hints about a rate hike taking place either as soon as July or delayed further until December. Hawkish hints will trigger more dollar buying flows.

Premium trade setups with targets and stops are published in the GBP/USD Outlook for the Week in Volume 66, this week’s Quid Report.

Cable is Breaking but Not Really

GBPUSD DAILY CHART

The U.S. dollar remains in consolidation after the past year’s rally. Now that the Federal Reserve has actually taken hawkish action, there is a possibility that the U.S. dollar weakens even in the face of a hawkish Federal Reserve. Therefore, the $GBPUSD remains bullish for as long as price remains above the 1.4000-level. However, as the $GBPUSD has attempted to move higher, price currently finds strong resistance at the 1.4500-level. While holding below the 1.4500-support level is actually a bearish signal for future price action, price has been unable to gain traction in either direction. The $GBPUSD has actually become rangebound between the 1.4500-resistance level and the 1.4000/50-support levels. As price action coils in this range, the $GBPUSD has actually found resistance within the greater range at the 1.4350-level. As the new trading week gets underway, there is no action to take whatsoever while the $GBPUSD trades within the range. Prudent traders wait for price to move to the range extremes before setting into action.

Premium trade setups with targets and stops are published in the GBP/USD Outlook for the Week in Volume 59, this week’s Quid Report.

ON AIR with FXStreet’s Live Analysis Room #FXRoom

GBP has gapped down across the board and the follow through right now is tremendous. I talked with Dale Pinkert, host of LAR #FXRoom, about the Brexit and the levels to watch that $GBPUSD and $GBPNZD. These levels are being challenged right now as the new trading week gets underway.

It’s already Monday and the Friday close is already so important. Neither bears nor bulls should get too excited with these opening flows. Anything can happen this week. Trade it well!

Premium trade setups with targets and stops are published in the Quid Report.

Dollar Has Decision To Make

The hold below the former 2015 lows on this break to new lows does remain a bearish development. After the release of the strong U.S. non-farm payrolls report in February, $GBPUSD weakness should have accelerated on the back of the strong U.S. dollar. However, the $GBPUSD has failed to move lower in this Fibonacci move that targets new lows below the 1.4079 low. Failed lows signal a rally in the $GBPUSD that takes price above the 1.4667 highs. A confirmed close above the 1.4600 level invalidates the bearish outlook.

GBPUSD WEEKLY CHART

The threat of inflation should keep the Federal Reserve hawkish with tighter monetary policy. With inflation data ticking higher in the U.S. and the labor market still quite robust, the $GBPUSD could make another push toward the lows. But without new lows, bears will come under pressure.

Premium trade setups with targets and stops are published in the GBP/USD Outlook in Volume 50, this week’s Quid Report.

ON AIR with Benzinga’s #PreMarket Prep Show

While the market awaits 2 interest rate decisions today, first from the Federal Reserve and later from the Reserve Bank of New Zealand, I talked about the central banks last week on Benzinga’s #PreMarket Prep Show. Take a listen to why I believe the rally in the Canadian dollar is just getting started and my conflicting thoughts about the U.S. dollar. I come on at the 1:05:00 mark.

Harmony in the Fed

The new year opens with a very significant start for the pound against the U.S. dollar. The only other time in recent history that the $GBPUSD opened the new year at lows was back in January 2002. At that time, the $GBPUSD bottomed as buying momentum picked up with the RSI finding support at the 40.0 level on the monthly chart. This time, however, is actually a bit different. Momentum is sliding to lows on the RSI. The $GBPUSD has gapped lower as the first trading week of 2016 gets underway. This gap down has cleared the zone of support between the 1.4750 level and the 1.4800 level. This zone has been an area of supply for the $GBPUSD eight times in the past sixteen years. It supported price last week as sellers took profits and established new positions against the support zone. Now this gap and subsequent move lower is a strong indication of further selling in the $GBPUSD. Strong economic reports from the UK may give sellers a reprieve. But the calendar is dominated by economic news out of the United States this week. Risk aversion is already entering markets as U.S. equities open 2016 with pronounced weakness. Any strong news about the U.S. economy is likely to rally the U.S. dollar further. Having broken below the 1.4680 level, the $GBPUSD is poised to test lows at 1.4565.

GBPUSD DAILY CHART

Premium trade setups with targets and stops are published in the $GBPUSD Outlook for the Week in Volume 44, this week’s Quid Report.

QUID REPORT LIVE

Due to the holiday shortened week and it being the very last week of 2015, no Quid Report was published this week. Instead, I am doing a video update to last week’s written report. While I have been on many forex shows, this is my first time hosting a live broadcast. This should be a quick update and review for the week in progress. Enjoy! And please leave your feedback in the comments. Perhaps this will be a new thing for me in 2016.

Will They Deliver?

All eyes on the Federal Reserve this afternoon. Will they raise interest rates? Will they sound hawkish? Will the USD rally? Watch this big picture view headed into, and immediately after, the Federal Reserve announcement for future direction in price action for the $GBPUSD.

GBPUSD WEEKLY CHART

 

Premium trade setups with targets and stops are published in the $GBPUSD Outlook for the Week (Volume 42, this week’s Quid Report).

King Dollar Won’t or Must Weaken

GBPUSD WEEKLY CHART

The USD found renewed strength last week as the ECB and PBoC ease monetary policy further. The new failed high on the breakout rally from 1.5109 to 1.5507 signaled a move back to the 1.5162 support level. A move to the downside is first met by the 1.5250, now turned, support level. A move lower in the $GBPUSD will be largely dictated by the moves in the S&P 500. If equities continue to advance, it is more likely that the USD weakens yet again sending the $GBPUSD to rally. Today’s release of the core PCE price index has markets back to expecting the first Federal Reserve interest rate hike to take place after June 2016. Risk appetite returning to markets on the back of S&P 500 strength has also added to USD woes. TWith risk appetite returning to markets on the back of S&P 500 strength, however, the USD strength has not been sustainable.
Outlook for the week:…


This is an excerpt from this week’s issue of QUID REPORT. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time updates to the weekly report. AVAILABLE NOW.

Dollar Dump

Federal Reserve Chairwoman Janet Yellen continues to insist that the central bank will raise interest rates this year. As such, the USD is showing strength on Yellen’s jawboning. The Federal Reserve has 3 months and only 2 more meetings scheduled ahead of the year end. Up until the release of the U.S. non-farm payrolls report, U.S. equities were not responding to the hawkish calls. Further weakness plagued the $SPX after it declined to the August 24th Black Monday lows. It was unable to sustain any rallies until Friday’s release of the weak U.S. jobs report. As long as industrial sectors are tepid, inflation is low, and the labor markets are softening, the Federal Reserve members don’t seem to agree that raising rates after ending QE is the correct course of action. Despite the Federal Reserve delaying to increase interest rates, the rally that occurred on the back of USD weakness (Volume 30) was completely reversed. Now that the market finally believes that the Federal Reserve will take no action on monetary policy, the $GBPUSD will likely rally on risk appetite and USD weakness. The failed high on the upside break of the consolidation range resulted in a new low lower than the previous low at 1.5135. With the move off the failed high complete, the $GBPUSD is free to move in either direction. With risk appetite returning to markets on the back of $SPX strength, the USD may weaken in this new week of trading. The lows circled in orange is a formidable zone of support to the downside. All attempts to move below 1.5162 has been met with supply. The new trading week opens finding resistance at the 1.5250 level. A break above this level fuels a rally back towards the 1.5500 level.

GBPUSD 4 HOUR CHART

After holding below the Friday highs, the $GBPUSD has moved lower as the new trading week gets underway. Price is back below the 1.5200 level signaling a return to the support zone starting at 1.5162 through 1.5100. A break lower moves to the 61.8% Fibonacci level where there is confluence with former lows at 1.5089 and the key 1.5076 level. However, weak fundamentals from the U.S. could also rule price action this week. The week kicks off with the release of the non-manufacturing ISM number during the Monday open. Soft U.S. economic reports will counter intuitively rally the S&P 500 as the market interrupts weak data with dovish U.S. monetary policy. This interpretation weakens the USD because it will signal an increasingly dovish Federal Reserve. If equities respond to weak economic data with more weakness, however, risk aversion will strengthen the USD.

Outlook for the week:


This is an excerpt from this week’s issue of QUID REPORT. Subscribers receive my research on all major GBP pairs at the beginning of the week, including access to @faithmightfx on Twitter for daily, real-time updates to the weekly report. AVAILABLE NOW.