Talking Points:
– GBP/USD to Face Larger Rebound on Bullish RSI Break; Divergence Remains in Focus.
– USD/CAD May Face Near-Term Topping Process on Sticky Canada CPI .
– USDOLLAR Under Pressure as Fed’s Bullard Sees Room to Delay QE Exit.

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GBP/USD

Despite the series of lower-highs in GBP/USD, the bullish divergence in the Relative Strength Index (RSI) may provide conviction/confirmation for a larger rebound as it appears to be breaking out of the downward trend carried over from back in July.
The next key U.K. event risk is the Bank of England (BoE) Minutes due out on October 22, but we would need to see a larger dissent within the central bank to look for a bigger reversal in the GBP/USD.
DailyFX Speculative Sentiment Index (SSI) still shows the retail crowd remains net-long on GBP/USD, but the ratio as narrowed from the previous day as it currently sits at +1.24.

USD/CAD

Despite the bullish inside-day candle, still watching the bearish RSI divergence in USD/CAD as it continues to carve higher lows this week.
Even though Canada’s Consumer Price Index (CPI) is expected to narrow to an annualized 2.0% in September, stickiness in the core rate of inflation may heighten the appeal of the Canadian dollar as it puts increased pressure on the Bank of Canada (BoC) to further normalize monetary policy.
Long-term outlook remains bullish as the inverse head-and-shoulders formation continues to take shape, and a break above 1.1380-90 (78.6% expansion) would expose the 1.1400 pivot 1.1430 (1.618% expansion).

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USDOLLAR(Ticker: USDollar):

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10970.83

11017.41

10958.55

0.15

83.12%

Chart – Created Using FXCM Marketscope 2.0
Despite the limited market reaction to Initial & Continuing Jobless Claims, the Dow Jones-FXCM U.S. Dollar Index as St. Louis Fed President James Bullard sees scope to retain the quantitative easing (QE) program beyond the next policy meeting on October 29.
Beyond the U. of Michigan Confidence survey, which is expected to downtick in October, will continue to watch Fed headlines as Chair Janet Yellen is scheduled to speak at the Boston Fed Conference tomorrow at 12:30 GMT.
May see a more meaningful run at10,869 (78.6% retracement) to 10,887 (61.8% retracement) should Fed interest rate expectations weaken further.

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Release

GMT

Expected

Actual

Fed’s Charles Plosser Speaks on U.S. Economy

12:00

Initial Jobless Claims (OCT 11)

12:30

290K

264K

Continuing Claims (OCT 4)

12:30

2380K

2389K

Fed’s Dennis Lockhart Speaks on U.S. Economy

13:00

Industrial Production (SEP)