USD Traders to Focus on Fed Shuffle- GBP Targets 1.6500+

Talking Points:

- USDOLLAR Holds Gain Despite Mixed Jobless Claims Report

- British Pound Continues to Buck Trend; Eyes 1.6500

USDOLLAR Daily

Chart – Created Using FXCM Marketscope 2.0

• 
  Remains in Bottoming Process- Bullish Above 10,657 (61.8 expansion)
  


• 
  Relative Strength Index to Provide Confirmation/Conviction
  


• 
  Interim Resistance: 10,753 (23.6 expansion) to 10,759 (61.8 retracement)
  


• 
  Interim Support: 10,657 (61.8 extension)- Closing Basis
  

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) continued to pare the decline from 10,727 despite the mixed Jobless Claims print, and the greenback may track higher over the remainder of the year amid the shift in the Fed’s policy outlook.

With Janet Yellen’s confirmation hearing quickly approaching (January 6), the composition of the 2014 Federal Open Market Committee (FOMC) will be a large focus as a handful of Fed Governors (Sarah Bloom Raskin, Jeremy Stein, and Jerome Powell) are expected to depart next year, and the shuffle may limit the scope of seeing another taper at the January 29 meeting as the board implements a more dovish twist on its forward-guidance.

Nevertheless, we will maintain a bullish outlook for the USDOLLAR as it continues to carve a higher low above 10,657 (61.8 percent Fibonacci expansion), but greenback may face produce choppy to whipsaw-like price action over the remainder of the month as market participation remains thin.

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GBPUSD Daily

• 
  Breaks Out of Narrow Range; Eyes 1.6500+ After Carving Higher Low
  


• 
  Interim Resistance: 1.6500 Pivot to 1.6540 (78.6 expansion)
  


• 
  Interim Support: 1.6200 (23.6 retracement) to 1.6250 Pivot
  

The greenback rallied against two of the four components, led by a 0.45 percent decline in the Australian dollar, while the British Pound continued to buck the trend, with the GBPUSD breaking out of the narrow range from the holiday trade.

The technical outlook continues to favor the topside targets for the sterling as the pair comes off of trendline support, and it seems as though it will only be a matter of time before the pound-dollar clears the 1.6500 handle amid the bullish break in the Relative Strength Index (RSI).

As a result, we will continue to implement a ‘buy the dip’ strategy for the GBPUSD, and the bullish sentiment surrounding the sterling should gather pace next year as the Bank of England (BoE) looks to normalize monetary policy ahead of schedule.

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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USD Traders to Focus on Fed Shuffle- GBP Targets 1.6500+