Talking Points:
- GBP/USD Clears Near-Term Range Ahead of U.K. Retail Sales Report.
- USDOLLAR Bid Ahead of FOMC Minutes as Fed Officials Endorse Higher Borrowing-Costs.
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GBP/USD
![GBP/USD Daily Chart](https://media.dailyfx.com/illustrations/2016/05/18/GBPUSD-Clears-Near-Term-Range-Ahead-of-U.K.-Retail-Sales-Report_body_Picture_5.png)
Chart - Created Using FXCM Marketscope 2.0
- Despite the limited market reaction to the U.K. Jobless Claims report, GBP/USD breaks out of the near-term range and threatens the downward trend carried over from August as fresh opinion polls show a narrowing risk for an EU-break up.
- With U.K. Retail Sales projected to rebound 0.6% in April, signs of a stronger-than-expected recovery may fuel the near-term advance in GBP/USD and put increased pressure on the Bank of England (BoE) to normalize monetary policy sooner rather than later as private-sector consumption remains one of the leading drivers of growth and inflation.
- A close above 1.4520 (38.2% retracement) may open up the next topside target around 1.4620 (50% expansion) to 1.4660 (50% retracement), followed by 1.4800 (61.8% retracement).
![GBP/USD SSI](https://media.dailyfx.com/illustrations/2016/05/18/GBPUSD-Clears-Near-Term-Range-Ahead-of-U.K.-Retail-Sales-Report_body_ScreenShot037.png)
- The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long GBP/USD since the last BoE rate-decision on May 12, with the ratio marking near-term extremes in March as it climbed towards +2.50.
- The ratio currently sits at +1.15 as 54% of traders are long, while long positions have narrowed 5.3% from the previous week, with open interest 0.4% above the monthly average.
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USDOLLAR(Ticker: USDollar):
Index | Last | High | Low | Daily Change (%) | Daily Range (% of ATR) |
DJ-FXCM Dollar Index | 11915.43 | 11952.8 | 11913.22 | 0.01 | 73.25% |
![GBP/USD Clears Near-Term Range Ahead of U.K. Retail Sales Report](https://media.dailyfx.com/illustrations/2016/05/18/GBPUSD-Clears-Near-Term-Range-Ahead-of-U.K.-Retail-Sales-Report_body_ScreenShot040.png)
![USDOLLAR Daily Chart](https://media.dailyfx.com/illustrations/2016/05/18/GBPUSD-Clears-Near-Term-Range-Ahead-of-U.K.-Retail-Sales-Report_body_Picture_2.png)
Chart - Created Using FXCM Marketscope 2.0
- The USDOLLAR pares the decline from earlier this week as Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams see scope for at least two rate-hikes in 2016, with Fed Fund Futures now showing an 18% probability for a rate-hike at the June meeting.
- Nevertheless, the Federal Open Market Committee (FOMC) Minutes may have a limited impact on interest-rate expectations as the majority of the 2016 voting-members endorse a wait-and-see approach, and more of the same language from central bank officials may produce a choppy market reaction as Fed Chair Janet Yellen remains in no rush to implement higher borrowing-costs.
- Still waiting for a closing price below 11,898 (50% retracement) to open up the next downside region of interest coming in around 11,836 (61.8% retracement) to 11,843 (38.2% retracement) as the USDOLLAR remains largely capped by the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement).
![DailyFX Calendar](https://media.dailyfx.com/illustrations/2016/05/18/GBPUSD-Clears-Near-Term-Range-Ahead-of-U.K.-Retail-Sales-Report_body_ScreenShot039.png)
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--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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