@faithmight, Author at FaithMight

March 19, 2014March 19, 2014

Sterling Digest – crosses firm up

Yesterday, $GBPUSD fell to new lows just pips ahead of the 50% Fibonacci level at 1.6536. It was the move many of us had been waiting on for weeks. Now that the consolidation in $GBPUSD is finally over, I believe we will see GBP resume its rally in many of the major pairs. The UK fundamentals have been there and the strong recovery is its reality.

However, what is interesting is the reversal that is beginning to confirm itself in the comm doll pairs. I expected these pairs would weaken to key support levels. However, this week, for the 1st time in months, those support levels are being broken. We may be on the cusp of D-Day where swing buyers start to sell and bail out of the market. OR. It could be an incredible buy opportunity because of the BoE minutes and FOMC announcements this week.

The BoE minutes are out and they are hawkish. (eFXnews)
I saw it too but it never counts unless you publish. These guys were 1st to show this incredible H&S in $GBPAUD. HUGE level. (Twitter, Factor)
The $GBPNZD put in a huge level too. While I thought 1.95 was key, 1.9150 proved to more significant. (Twitter, FMFX)
Raising interest rates vs. tapering QE — interesting take (Telegraph)
The huge bounce off support in the $GBPCAD this week very nicely reflects a dovish Bank of Canada and overall weakness in Canada versus a hawkish Bank of England and robust UK. (Ashraf Laidi)
A review of the $GBPUSD move we have been waiting on all month (FMFX)

March 18, 2014March 18, 2014

Sterling Digest – bulls underneath it all

Low inflation has given the BoE the space to keep monetary policy easy as is. That, in turn, supports the economy which is running very robustly. The market has had every reason to be bullish pounds as the UK recovery has proven to take root. $GBPUSD has come off its new highs but still only in a shallow retracement. It’s been a chop fest as cable slides but trades in a range between 1.6750 – 1.6580. This choppy correction is only indicative of the strong bull trend that is in place. I suspect that cable continues lower to find support around 1.65. But I’ve been piping on this for weeks. I guess that means by now all the algos know too.

Yes. I have been a broken record about this consolidation pattern in $GBPUSD. (FMFX, FMFX, FMFX)
I couldn’t disagree more with UBS. But retail vs. institutional is nothing new. (eFXnews)
While I agree with JPM, I’m more bullish than they. (eFXnews)
Nouriel Roubini is hawkish on the BoE. Is this a contrarian signal to the upside? (Forex Live)
The fundamentals in the UK are phenomenal. Bad weather be damned. (CNBC)
I like this long term look at cable. Good stuff. (BruniCharting)

March 12, 2014March 12, 2014

When It’s Over in Cable

When the consolidation in $GBPUSD is over, the GBP will rip across the board. Cable leads the way during times of consolidation. Even with today’s new lows, I don’t think it’s over. If we look back to our last Fibonacci consolidation range, we got a new low only resulted in a return to the top of the range. Not the expected breakout. That breakout didn’t happen until the 50% Fibonacci level at 1.5850 was reached.

But if the consolidation in $GBPUSD is truly over, I think we see the $GBPCAD, $GBPAUD, $GBPNZD, and $GBPJPY all resume their bullish trends too. Price this week sets up at key support levels in these pairs: $GBPCAD (1.85), $GBPJPY (170), $GBPNZD (1.9550), $GBPAUD (1.85). The $EURGBP is also at the key 0.8350 level but euro seems to be on a tear all its own right now. However, for me, same theory applies for $EURGBP to push price lower on a rally in GBP.

Trade what you see. There are many geopolitical situations at play now than when sterling made its run last year. But cable reigns supreme. Watch its price action.

March 10, 2014March 18, 2014

The Week Ahead In Charts

GBP/USD

No real change in the last 2 weeks as cable remains rangebound during its consolidation. Price action reminds me of the price action back in October when price finally broke above 1.60. Cable consolidated in a range between 1.61 and 1.59 for that entire month. It wasn’t until price broke down to the then 50% Fibonacci retracement level at 1.5850 that price resumed its monster breakout to new highs above 1.63. I believe that is same price action we have now and price will not resume higher above 1.6820 until we see price fall to 1.6550/00.

EUR/GBP

The $EURGBP has finally broken higher above 0.8300 and has moved right into the resistance level at 0.8330. Between here and 0.8350 is a potential sell zone for a move back to the lows at 0.8160. If $EURGBP buyers are to gain anymore traction, there must be a daily close above 0.8350 to signal a sustained move higher to 0.8400.

GBP/CAD

As Canadian fundamentals continue to deteriorate (Friday’s jobs report showed Canada lost jobs last month), the $GBPCAD will remain bid even as sterling continues to consolidate. The major psychological level at 1.85 remains a level where traders see major positioning for when GBP strength returns. The $GBPCAD has found staunch resistance at 1.86 but still targets 1.90 midterm.

GBP/NZD

I’d imagine there is some serious positioning going on in the $GBPNZD right now too. This pair actually had some real movement falling over 350 pips in the past 2 weeks. Price sits at the bottom of this consolidation range as the week opens. It’s a light week out of the UK but the Reserve Bank of New Zealand could surprise markets. Likely more jawboning but geopolitics have changed quite a bit with this Ukraine-Russia situation and commodity prices have firmed. 1.95 is key support into the rate decision.

GBP/JPY

The Bank of Japan is set to deliver a monetary policy announcement this week too. The $GBPJPY opens the week at the 172.00 former highs after moving off the new highs at 173.55. A correction lower sees support at 171.50. However, $GBPJPY remains bullish above 170.00.

Compare:

The Week Ahead In Charts (FMFX)

February 24, 2014February 24, 2014

21st Century MegaTrends

I’ve often thought that the method by which we defined employment was no longer adequate. How do you explain slightly increasing consumer spending with the labor participation rate falling here in the US? Many of us are creating are our own opportunities and, thus, creating smaller enterprises to do so. I believe the many people leaving the traditional labor market (measured by our unemployment rate) are becoming entrepreneurs. Whether the title is self-employed, freelancer, or sole proprietor, many people are making money working with other companies rather than for those companies. Clem Sunter explains it so well in this interview last week at the Private Equity in Southern Africa Conference in Spier, Stellenbosch, South Africa. Worth a listen on 3 megatrends playing out right now: the aging of the world, increased natural disasters, and the rise of entrepreneurs. I’ll have to pick up the book.

Watch VIDEO: Clem Sunter on the Pursuit of Entrepreneurship; February 2014 (SAVCA)

February 23, 2014February 24, 2014

The Week Ahead In Charts

After a week of consolidation in sterling, GBP pairs are a mixed bag as this new trading week gets underway.

GBP/USD

Though $GBPUSD has moved off its recent multi-year highs, it has been a volatile and choppy ride lower. Expect more of the same again this week, as this pair continues to correct lower towards 1.6500. I believe big time buyers are set up all around 1.65 between the 50% and 61.8% Fibonacci retracement levels. A move from these levels supports a rally to 1.7000 mid term.

EUR/GBP

The $EURGBP spent all last week struggling at the 0.8250 level. On Friday, however, price broke above 0.8250 and held the level to close the week. While the daily chart is in a clear downtrend, price is holding support at the weekly chart’s 61.8% Fibonacci retracement level. This correction has the potential this week to continue higher to the zone between 0.8330 and 0.8350. From here, it will be decision time. But the odds are with the bears as GBP could catch another bid and push price back to lows.

GBP/CAD

While $GBPUSD and $EURGBP consolidate, the $GBPCAD price action has remained bullish . Candaian fundamentals keep the $GBPCAD well supported on dips. Dips due to GBP weakness have been bought below 1.8500 as CAD fundamentals continued to deteriorate. For some reason the Canadian economy is falling into recession even as the US, its largest trading partner, has remained robust. This pair will continue to have issues getting higher as long as cable is weak. Once $GBPUSD starts to show strength again, the $GBPCAD should find conviction higher again.

GBP/NZD

The $GBPNZD has remained very bullish closing the week above the almighty 2.00 level. As the $GBPUSD continues its consolidation lower, there is major positioning occurring at this major psychological level in $GBPNZD. It has been a whipsaw at the highs but as long as the overall GBP bull trend remains in place, this pair is poised for 2.05 mid term.

GBP/JPY

The $GBPJPY has remain elevated as equity markets bounced higher to the 2014 resistance levels. This week, all eyes on US stocks and emerging markets as 2 wars ended this weekend. The stage is set for risk to rally higher as geopolitical events turn towards peaceful resolution. As $GBPJPY opens this week above 170.00, the bullish sentiment favors buyers even as the trend still remains corrective below 175.00.

All these charts suffice it to say that sterling is smoking hot. A trend that can correct is only headed higher. And a trend that holds up during consolidation has the makings for a major breakout. $GBPUSD is the pair to guague timing in the GBP crosses during this time of consolidation. Once major levels are reached in cable, sterling may rock out across the board once again. Or not. Price will ultimately tell.

Disclosure: I am long $EURGBP as of this writing since last week.

February 13, 2014February 13, 2014

Sterling Digest, 13 February 2014: phase two

Mark Carney, Governor of Bank of England — The honeymoon is over

Bank of England Governor Mark Carney delivered the long awaited Inflation Report after “scrapping” forward guidance just a month ago. What Carney gave is what some are dubbing stronger guidance. He recognized and upgraded the UK economic recover and then added more indicators to produce “Forward Guidance – Phase 2”. Whatever you want to call it, the markets liked it and sterling rallied hard across the board. The rally continued even during the Asian session as those traders got the opportunity to digest the Inflation Report and Carney’s remarks. Now with sterling at key resistance levels, does it have the strength to go higher? What’s even more interesting to watch is if sterling can continue to rally in the face of a dovish BoE.

It’s the hot money, stupid (FT Alphaville)
Carney broadens forward guidance with extra slack (City Index)
How Far Off Have the BOE’s Predictions Been? (WSJ)
The U.K. Economy: Five Key Takeaways (WSJ)
3 Reasons Why the Bulls Loved The BOE Inflation Report (Baby Pips)
BoE risk of a hike bought forward, GBP bid (FXStreet)
Mark Carney putting a Canadian twist on the Bank of England (Forex Live)
‘RIP, Forward Guidance’: Revising Our Sterling Forecasts (eFXnews)
A Look at British Pounds From the Top Down (All Star Charts)

Image credit

February 6, 2014February 6, 2014

Is This Euro Rally For Real

It surprising to see the euro’s positive reaction to Draghi’s oration. There are pundits that like to speak about President Obama but he has nothing on our resident ECB Governor, Mario Draghi. After leaving monetary policy on hold, Draghi reiterated low interest rates and hinted at a cut or QE depending on data. And yet, the euro rallies. With an approving nod toward low inflation benefits on wages and recent positive economic developments, Draghi gave this budding euro rally some fresh legs to stand on.

The weekly chart is a clear downtrend but this 61.8% Fibonacci retracement level has turned out to be a big deal right now. It was hard to get long earlier this week knowing how dovish the ECB is. But today’s positive reaction, really fits the technical outlook for a rally to 0.8600. A Friday close above 0.8300 would be very bullish also. Near term targets to contend with for any type of material trend reversal to occur lay at 0.8350, 0.8400 and 0.8500.

Listen to more $EURGBP analysis here.

February 5, 2014February 5, 2014

Time In The #FXRoom

Yesterday, I had the pleasure of chatting with Dale Pinkert, host of FXStreet’s Live Analysis Room. We talked markets and, of course, all things GBP.

Video streaming by Ustream

February 4, 2014

New Month, New Week, New Attitude

It’s the first week of a new month in a new year. We will get a new attitude from a Bank of England that has scrapped its new forward guidance policy after less than an year of implementation. This action makes this week’s rate decision all the more interesting.

In the mean time, we have a slew of PMI data before Thursday. A disappointing manufacturing PMI number kicked off the week. With a miss to start the week, it could be very likely that data disappoints in construction today and service tomorrow. Trading yesterday took sterling to key swing levels in all the major GBP currency pairs. Price moves this week could start a trend. Here is where we stand ahead of today’s release.

Long overdue for a correction, GBP could easily be a great buy or sell deeding on the market’s reaction to PMI data and the BoE this week.