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Category: The Sterling Digest

The Sterling Digest now as a weekly summation of news to consider when trading GBP pairs, in particular.

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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.

GBPUSD DAILY CHART

  • 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)

 

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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.

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Sterling Digest, 23 January 2014: threshold not target

 

If you repeat it enough, the market will listen. At least that is what the Bank of England is hoping. The UK sits 0.1% away from the unemployment rate threshold at which forward guidance dictates that their central bank would start to consider raising rates. But markets have thrown the word consider aside to side and are breaking out with volatility. With the GBP ripping across the board and the $FTSE falling lower, you have to believe that all the markets are trading on new rate hike expectations when just 12 months ago we were talking about raising quantitative easing. This hawkish change in sentiment is certainly a fundamental change that even technical traders are paying attention to.

 

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Sterling Digest, 15 January 2014: WTF

TIME magazine cover of new Fed chairman Janet Yellen
Until her 1st meeting in March, USD may hijack the markets with uncertainty

These 1st 7 trading days have been a nightmare for me with sterling. SHEESH! The market pushed to highs and lows and yet still remains rangebound. The volatility, too, has been intense as players jostle for position in the year open. Nobody wants to miss the monster rally of 2013. Both bears and bulls have been shook out and made money. It hurts but there still a lot of new year left. It is important to admit to the pain, analyze mistakes and make the next decision. Timing has needed to be perfect and fearless. Yet this is always easier said than done. A $GBPNZD short at 2.00 was a beautiful opportunity but the volatility on NFP day shook me and faked me right out of the trade. Other traders have been sharing similar frustrations in the market. Thankfully, there are others still who are seeing very clearly and their shares have been a guiding light to (some) clarity. That is the beauty of the market…and the stream.

 

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Sterling Digest, 27 December 2013: the Last Friday

the FED. Free money. Take some. | Gary Varvel cartoon
The reason why GBP continues to rally in some pairs and may correct in others for 2014

It has been an incredible 2013 for GBP sterling. It is only fitting that we see these breakouts only extend further on this last Friday session of 2013. The $GBPUSD, $GBPNZD, $GBPCAD, $GBPAUD, and $GBPJPY all hit multi-year highs today. Amongst these, $GBPUSD is the only seeing a correction off the highs. Others, like the $EURGBP and $GBPCHF,  actually saw sterling decline today though both recovered losses as trading wore on. In thin holiday markets, this last Friday saw volatile price action in contrast to very rangebound markets during the early half of this week. Given the year that was 2013 in sterling, what does 2014 hold in store for GBP trading? Instead of the uniform moves that we got for much of the 2nd half of 2013, it looks like sterling will be a mixed bag in 2014.

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A Very Big Deal

GBPUSD DAILY

After regaining the big 1.60 psych level early this week, $GBPUSD is poised to close this week back below 1.60. After last week’s close, this is a VERY big deal.

LAR interview November 8 2013
click to watch

Earlier this morning, I chatted with Dale Pinkert in the FXStreet’s Live Analysis Room (LAR) where I explain this possibilities for this $GBPUSD chart and other GBP pairs, including $EURGBP, $GBPAUD, $GBPJPY.

Read also:

Big Deal (FaithMightFX)

This rally looked good until it didn’t. (FaithMightFX)

Peter, himself a GBP legend even though he’ll never admit it, just may be right about cable after all. (Peter Brandt)

 

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Sterling Digest, 26 September 2013: grumpy bulls

 

split screen of GBPUSD weekly and 4hr charts
No wonder bulls are grumpy

We left off the Digest musing over the strength in sterling due to robust UK economic data as GBP hit long-term resistance levels against all major currencies. Since August, GBP has experienced tremendous breakouts in some pairs and significant price corrections in others. Now that $GBPUSD is above 1.60, $GBPCAD above 1.65, $GBPAUD above 1.71 and $EURGBP at 0.84, it seems as though GBP bulls are having their way. However, these moves have not been without resistance. The moves higher in sterling have been a grind with slow, choppy moves that have been difficult to trade on anything but a short term basis. With a light calendar this week, the market has allowed GBP to correct but robust economic data gave life to sterling as $GBPUSD, in paritcular, managed not to loose its important 1.60 level. With 3Q at its end, October brings the market its first glimpse of fall season data. If the UK economy continues to put in robust results, expect GBP to continue its summer rally back to long-term resistance levels.

 

Read the last issue: Sterling Digest, 23 August 2013: reality bites

 

 

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Sterling Digest, 23 August 2013: reality bites

Free stress test. Cool photo on Flickr
Are the markets telling us something?

Carney was supposed to be bearish for sterling. He was supposed to do some monetary magic that would weaken sterling to levels that would jumpstart industry in a stagnate British economy. There is just one problem with that. The story changed. When Carney accepted the position, the British economy was a very sad one. But that is not today’s scenario 6 months later. Numbers have been robust. Optimism is starting to creep in. Headlines are honestly hopeful. But let us not get too ahead of ourselves. The latter part of 2013 is yet to unfold. With sterling moves higher on yields (which are moving higher on growth), the question remains is if this growth is sustainable and repeatable. The uncertainty around this answer plays out as a grinding market for now. The moves are choppy but very well bid into some major resistance levels. ACROSS THE BOARD. $GBPAUD has seen 1.75; $GBPNZD targets 2.00; $GBPUSD has flirted with 1.5750; and $EURGBP remains supported by 0.85. The $GBPCAD weekly chart is unbelievable with price right at long-term resistance at 1.64. Incredible strength in sterling in the middle of August seems a little too good to be true. Wait for September.

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Sterling Digest, 13 August 2013: mixed post guidance

DJ mixing sound board
Carney remixes guidance for UK

Sterling has been mixed since the announcement of forward guidance giving the Bank of England (BoE) a dual mandate to target both inflation and unemployment. It also means that economic data takes on increased importance as markets parse news to determine central bank sentiment and direction in price action. However, sterling has been mixed in the week after forward guidance was unveiled. Last week, GBP rallied across the board post-announcement taking $GBPUSD to 1.5571 and $EURGBP to 0.8578. In this new trading week, however, GBP has weakened considerably off those highs. The spotlight of this week will be the release of the BoE meeting minutes which will give the market a peek into the central bank’s true sentiment on forward guidance. Given the unanimous vote last month not to increase QE, a split vote threatens to weaken the GBP and increase volatility in the near term.

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Sterling Digest, 6 August 2013: flavors of guidance

picture of flavored salts
Which flavor of guidance will Carney serve up?

This week, it is all about the Inflation Report released tomorrow. With no statement released after the Bank of England decided not to change monetary policy, the market has been in hot anticipation of this formal forward guidance that Mark Carney will issue for England. The discussion of forward guidance has become fragmented: hard guidance vs. soft guidance; inflation target vs. GDP target. Given the state of the UK economy, it will be interesting to hear what Carney has to say in his 1st inflation report. Even more interesting will the be the market reaction. Yesterday’s strong retail sales caused sterling to rally hard across the board. Today, however, sterling has weakened after strong manufacturing numbers were released. Either the market is running out of steam or it is already looking ahead to tomorrow’s inflation report.

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