GBP/USD Remains Capped by 1.3200 Hurdle Ahead of U.K. 3Q GDP Report

Talking Points:

EUR/USD Holds Narrow Range, Outlook Hinges on ECB’s QE Exit.

GBP/USD Remains Capped by 1.3200 Hurdle Ahead of U.K. 3Q GDP Report.

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DailyFX TableEUR/USD

EUR/USD pares a decrease from progressing this week, with a sell rate during risk of confronting range-bound conditions forward of a European Central Bank (ECB) assembly on Oct 26 as President Mario Draghi and Co. seem to be on march to breeze down a asset-purchase program.

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The Governing Council is widely approaching to pierce divided from a easing-cycle as ‘the continued clever movement of a euro area economy upheld certainty that acceleration would gradually strech levels in line with the ECB’s medium-term objective.’ In turn, a executive bank might blueprint a some-more minute exit plan generally as a executive bank’s many new lending consult records that ‘in terms of a impact of a ECB’s stretched item squeeze programme (APP), euro area BLS banks continued to news a certain impact on their liquidity position and marketplace financing conditions over a past 6 months.’

In turn, a Euro might face a bullish greeting as a ECB alters a opinion for financial policy, yet marketplace participants might compensate increasing courtesy to a destiny combination of a executive bank’s change piece as a flourishing series of Governing Council officials uncover a larger eagerness to extend a quantitative easing (QE) module over a Dec deadline. As a result, a prolonged QE module might eventually drag on EUR/USD with a Federal Reserve mostly expected to broach another rate-hike in December.

EUR/USD Daily Chart

EUR/USD Daily Chart

  • EUR/USD stays during risk of confronting a some-more suggestive improvement as both cost a Relative Strength Index extend a bearish formations from August, with a near-term opinion capped by a former-support section around 1.1860 (161.8% expansion).
  • May see EUR/USD give behind a miscarry from a monthly-low (1.1669) as it struggles to reason above a 1.1770 (100% expansion) region, with a break/close subsequent a 1.1670 (50% retracement) jump opening adult a subsequent downside segment of seductiveness around 1.1580 (100% expansion).

GBP/USD

GBP/USD struggles to reason a belligerent forward of a allege U.K. Gross Domestic Product (GDP) report, with a span confronting a larger risk of giving behind a allege from a October-low (1.3027) amid a fibre of unsuccessful attempts to tighten above a 1.3210 (50% retracement) hurdle.

Even yet a Bank of England (BoE) warns ‘some withdrawal of financial impulse is expected to be suitable over a entrance months in sequence to lapse acceleration sustainably to target,’ a muted GDP news might beget another 7 to 2 separate assembly as a U.K. economy expected to grow another 1.5% in a third entertain of 2017. In turn, a pound-dollar sell rate might vaunt a some-more bearish behaviorahead of a subsequent BoE assembly on Nov 2 as both cost and a Relative Strength Index (RSI) keep a downward trends carried over from September.

However, a collection of better-than-expected information prints might hint a bullish greeting in a British Pound as it puts increasing vigour on Governor Mark Carney and Co. to normalize financial policy, and a executive bank might adopt a some-more hawkish tinge forward of 2018 as ‘members continue to decider that, if a economy follows a trail broadly unchanging with a Aug Inflation Report executive projection, afterwards financial process could need to be tightened by a rather larger border over a foresee duration than stream marketplace expectations.

GBP/USD Daily Chart

GBP/USD Daily Chart

Chart – Created Using Trading View

  • GBP/USD sits during a pivotal connection as it comes adult opposite channel resistance, with a miss of movement to tighten above a 1.3210 (50% retracement) hurdle lifting a risk for serve waste generally as a Relative Strength Index (RSI) highlights a identical dynamic.
  • With that said, a break/close subsequent a Fibonacci overlie around 1.3090 (38.2% retracement) to 1.3120 (78.6% retracement) opens adult a monthly-low (1.3027), with a subsequent downside segment of seductiveness entrance in around 1.2950 (23.6% expansion) to 1.2960 (78.6% retracement), a former-resistance zone.
  • Need a break/close above a topside jump around 1.3300 (100% expansion) to 1.3320 (38.2% retracement) to adopt a some-more constructive opinion for GBP/USD.

Retail Sentiment

Retail Sentiment

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  • Retail merchant information shows 41.2% of traders are net-long EUR/USD with a ratio of traders brief to prolonged during 1.42 to 1. The series of traders net-long is 4.7% aloft than yesterday and 0.4% reduce from final week, while a series of traders net-short is 2.8% reduce than yesterday and 7.8% reduce from final week.
  • Retail merchant information shows 53.3% of traders are net-long GBP/USD with a ratio of traders prolonged to brief during 1.14 to 1. The series of traders net-long is 11.1% aloft than yesterday and 6.8% aloft from final week, while a series of traders net-short is 0.2% aloft than yesterday and 4.3% reduce from final week.

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— Written by David Song, Currency Analyst

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