April 2015 - Page 2 of 2

April 6, 2015June 15, 2015

Election Times

I remember the price action during the Scottish referendum. $GBPUSD moved over 500 pips on the announcement of the its official results. So I find this chart from Financial News to be incredible:

BlackRock took a snapshot of this adjusted sterling volatility measure at the start of this week, and compared that to snapshots taken 37 days before the 2010, 2005 and 2001 UK general elections, and last year’s Scottish Independence referendum.

The result is the chart above. What it shows is that the currency markets, at least, are the most nervous they’ve ever been ahead of a UK general election.

What kind of volatility comes with a market that is the most nervous it has ever been?! It’s a terrifying thought but apparently not for investors.

…BlackRock’s analysts observe that while implied sterling volatility has spiked in the currency markets, other areas of the financial world currently appear almost complacent about the UK election. Credit default swap spreads, for example, which capture the price of insuring against the risk of a UK government debt default, have remained stable, and the gilt market “has priced in little fiscal risk premium since the 2010 election”.

It concludes: “Could markets be too complacent? We think so. We do not see the election posing long-lasting credit risk to owners of UK sovereign debt – but we do brace for volatility in the short term.”

In a world of easy money and you are one of 2 reigning money in, perhaps it is as simple as supply and demand. Money flows to high quality yield. Demand for GBP-denominated assets could buoy GBP even if markets are the most nervous they have ever been about a British general election. For long-term investors, this is noise. The trends are clear for the GBP. For day traders, this volatility will be a fool’s paradise. Either way, it is opportunity.

The only way to come out of the volatility unscathed and capitalize on the opportunity is to have a plan and trade your plan. Know what’s coming and ride the waves soundly.

Source: Markets’ pre-election nerves run high (Financial News)

April 2, 2015June 15, 2015

CHART OF THE WEEK: EURO HERO

Each week, I’ll highlight a chart out of the Quid Report.

This week it is the $EURGBP 4-HOUR chart. Everything about this pair screamed for more weakness at the top of the week. And it was bearish until about 8 hours ago. And this chart suddenly came into play. The reasons why are posted on the feed. I love these markets.

Subscribers receive my research on all major GBP pairs at the top of the week, including access to @faithmightfx on Twitter for daily, real-time calls and adjustments to the weekly report. SIGN UP AND RECEIVE A FREE TRADING BOOK AVAILABLE NOW.

April 1, 2015June 15, 2015

Pay Attention to Risk

I asked the question as the week closed on Friday.

Is the USD really going to weaken in the face of all this shifting geopolitics? Technicals and fundies diverging. Boo. $GBPUSD

— Lydia Idem Finkley (@faithmight) March 28, 2015

For all the geopolitical stress on markets right now, it is no wonder that USD weakness can’t get a foothold in cable. Looming in the background are many geopolitical risks at play. War is waging, energy markets are changing, deflation won’t go away, and yields won’t go higher. Elections around the globe have created shifts in fiscal policy. We see that with Greece. Nigeria voted in a new president and a change of government over the weekend. The U.S. will do the same next year. While equities have remained at highs, perhaps markets are getting a bit more cautious and risk averse. This undoubtedly helps the U.S. dollar along with the Japanese yen and the Swiss franc – our traditional safe haven currencies.

If USD strength is to really breakout, versus the GBP in particular, price will need to break and close 2 CONSECUTIVE candles below the support zone between 1.4750-1.4800. We’ve been faked out before.

While the recent lows were a breakout below support, we got an immediate weekly close back above the support zone. With the bullish divergence here, it looks like a false breakdown may be in place. We’ll get our confirmation this week especially with the economic releases due out this week. IF price holds support, this will be a bullish signal worth taking advantage of.

This is an excerpt from this week’s issue of Quid Report. Subscribers receive my research on all major GBP pairs at the top of the week, including access to @faithmightfx on Twitter for daily, real-time calls and adjustments to the weekly report. IF INTERESTED, SIGN UP NOW AND RECEIVE A FREE TRADING BOOK. AVAILABLE NOW.