GBP/USD Flashes Oversold Signal; FX Sentiment Holds Near 2016-Extreme

Talking Points:

NZD/USD Downside Targets in Focus as Head-and-Shoulders Formation Unfolds.

GBP/USD Flashes Oversold Signal; Retail Sentiment Holds Near 2016-Extreme.

DailyFX

NZD/USD Daily

NZD/USD Daily Chart

Chart – Created Using Trading View

  • NZD/USD stands during risk of fluctuating a new array of reduce highs lows as it appears to have forged a head-and-shoulders arrangement during a summer months, with a Relative Strength Index (RSI) also reinforcing a bearish opinion for a sell rate as a oscillator breaks down from a bullish trend from progressing this year; head-and-shoulders projection suggests a pierce subsequent a 0.7000 handle.
  • Will continue to guard marketplace expectations amid conjecture a Reserve Bank of New Zealand (RBNZ) will broach another rate-cut during a final 2016 interest-rate preference on Nov 10, though some-more of a same from Governor Graeme Wheeler and Co. might column adult a kiwi going into a finish of 2016 amid a low-yielding environment.
  • Closing cost subsequent 0.7170 (38.2% retracement) raises a risk for a pierce towards a subsequent downside aim around 0.7040 (50% retracement) to 0.7080 (50% retracement).

GBP/USD Daily

GBP/USD Daily Chart

Chart – Created Using Trading View

  • GBP/USD continues to hunt for support as a flourishing array of European Union (EU) officials disagree a U.K. needs to trigger Article 50 of a Lisbon covenant before starting negotiations, and a argent stays during risk of confronting serve waste over a days forward as a Relative Strength Index (RSI) flirts with oversold territory; mangle subsequent 30 in a oscillator would advise a bearish movement is entertainment pace, and would need to see a pierce out of oversold domain to advise a near-term liberation is holding shape.
  • Growing concerns surrounding ‘Brexit’ might put increasing vigour on a Bank of England (BoE) to exercise some-more non-standard measures as a undo from a EU’s single-market raises a risk for a recession; devious paths for financial process might worsen a bearish view surrounding GBP/USD generally as Fed officials seem to be creation a some-more common bid to ready U.S. households and businesses for a Dec rate-hike.
  • Will keep a tighten eye on a downside targets as GBP/USD carves a near-term array of reduce highs lows, with a break/close subsequent 1.2630 (38.2% expansion) opening adult a subsequent downside segment of seductiveness during 1.2460 (618% expansion), followed by 1.2360 (50% expansion).

DailyFX SSI

  • The DailyFX Speculative Sentiment Index (SSI) shows a FX throng stays net-long GBP/USD given Sep 13, with a ratio attack a many impassioned reading given 2003 as it climbed to +5.66 progressing this week.
  • GBP/USD SSI now stands during 5.71 as 85% are long, with prolonged positions 29.8% aloft from a prior week, while open seductiveness is 28.9% above a monthly average.
  • NZD/USD SSI now sits -1.42 as 41% of traders are long, with brief positions 7.1% reduce from a prior week as a ratio narrows from an impassioned reading of -3.41 in September.
  • With a sell throng stranded on a wrong, a SSI might continue to act as a contrarian indicator for GBP/USD generally as a span carves a near-term array of reduce highs lows.

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— Written by David Song, Currency Analyst

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