Daily FX Wrap: GBP hit as BoE lowers inflation forecasts and Forbes remains the lone dissenter, while a neutral RBNZ thwarting hawkish calls pushes NZD to 7-month lows.

Not so ‘super’ Thursday for GBP with hard data in the form of construction, industrial and Mfg. figures all falling short of analyst estimates which pressured GBP through 1.29. The move to the downside was further exacerbated by the Bank of England QIR which showed a 7-1 vote split (Forbes dissenting), consequently GBP dipped amid an unwind of speculators hinting at a possible 6-2 split with Saunders accompanying Forbes. Additionally, the central bank had lowered their medium and long term inflation forecasts, weighing on GBP to test 1.2850.

USD-index popped higher on the PPI and weekly jobless claims beat, subsequently pushing USD/JPY to two month highs. Although, offers layered in the pair at 114.40 through to 114.50 curbed further advances, while the upside had been short-lived with the USD slipping through 114.00 to test 113.50 to the downside amid the slip in US yields in response to the soured sentiment observed shortly after the Wall St. open.

Over to commodity currencies, NZD lower by over a percent, to trade at 7-month lows as the RBNZ dispelled hawkish speculation by stating that accommodative monetary policy will remain for a considerable amount of time, while Governor Wheeler noted that inflation expectations will have to rise in order to consider tightening. CAD continues to soften with USD/CAD meandering around 1.3700, the impetus this time caused by Moody’s downgrading 6 Canadian banks which was prompted by weakening credit conditions in Canada.

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Dollar Index Daily

Price is currently at resistance so buying Dollar at this price is not advisable. While our stoch indicates further upside it would be nice to see price come down to support with Bulls looking to buy the dip. Support on Daily at MM2 though H4 provides closer levels.

Dollar Index H4

Price is currently at the weekly target for Bulls after coming off of WM2 on Sunday night. The support we identified in the last post at WM4 held. The top of the range price broke out of earlier this week is at WR1. 21 above the 55 - trend is bullish and therefore unwise to sell Dollar though unwise to buy it at this price.

US10Y H4

Monday's post warned about risk sentiment changing in the market due to indices being at hard core resistance and the VIX at extremely low levels. We saw the drop we were expecting and Yen and Gold strength followed as well as a rise in price of the US10Y. Note that price is currently forming a double bottom at MS1 with an oversold daily stoch and the H4 stoch indicating bullishness. Price is at the 21 so a lower low is possible though I would keep an eye on price action. I don't think we have seen the last of risk off sentiment in the market.

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