- USDOLLAR Slips to Fresh Monthly Low (10,468); Nonfarm Payrolls Delayed
- GBP/USD at Risk of Larger Correction Ahead of Bank of England (BoE) Meeting
- Opening Range Continue to Take Shape; Fresh Monthly low (10,468)
- Waiting for Bearish Relative Strength Index Momentum to Break for Rebound
- Interim Resistance: 10,582 (23.6 expansion) to 10,589 (50.0 retracement)
- Interim Support: 10,449 (100.0 expansion)
- Retails Upward Trending Channel Dating Back to July
- RSI Falling Back from Overbought; Bullish Trend at Risk
- Interim Resistance: 1.6300 Pivot
- Interim Support: 1.6000 Pivot
Chart - Created Using FXCM Marketscope 2.0
The Dow Jones-FXCM U.S. Dollar Index (USDollar) continues to threaten the June low (10,469) as the weaker-than-expected ISM Non-Manufacturing survey dampens the prospects for a stronger recovery, and the reserve currency may face additional headwinds over the near-term as the fiscal drag continues to limit the Fed’s scope to taper the asset-purchase program.
With more Fed speeches on tap for later today, we may see a growing number of central bank officials adopt a more cautious tone ahead of the October 29-30 meeting amid the government shutdown, and the reserve currency may continue to search for support as the bearish momentum in the Relative Strength Index continues to take shape.
In turn, we may see the USDOLLAR continue to carve a series of lower highs paired with lower lows, and the bearish sentiment surrounding the greenback may gather pace ahead of the debt limit amid the deadlock in Congress.
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Two of the four components advanced against the greenback, led by a 0.43 percent rally in the Euro, while the British Pound bucked the trend, with the GBP/USD struggling to hold above the 1.6200-10 region, the 23.6 percent Fibonacci retracement of the 2009 range.
The GBP/USD may face a more meaningful correction in the coming days as the RSI falls back from overbought territory, and the pair may ultimately threaten the bullish trend dating back to July should the oscillator fail to hold trendline support.
In turn, the British Pound may work its way back towards the 1.6000 handle ahead of the Bank of England (BoE) meeting on tap for October 10, but a more material shift in the policy outlook may trigger another run at 1.6300 as Governor Mark Carney moves away from the easing cycle.
Written by David Song, Currency Analyst