I made my debut appearance on Benzinga’s #PreMarket Prep Show last week and had a lot of fun. As a first time guest, I get to talk more about my background and tips for new traders which is always fun. Check it out!
The Sterling Digest, 27 June 2014: poker face
So here we are with $GBPUSD back above 1.7000. It is the first time since 2008 since we’ve traded at these levels. To me, nothing is more bullish than $GBPUSD above 1.70, $EURGBP below 0.80, $GBPAUD above 1.80 and $GBPJPY above 170. But the bears are milling and are suspect of these rallies.
I admit I’m wary too but for another reason. $GBPUSD hasn’t had a decent correction yet.
This was Monday. Since then, $GBPUSD has staged a correction to 1.9950 support from the 1.7050 highs. $EURGBP retraced 38.2% to 0.8030 this week. And I think that’s all we will get. Another Friday close above 1.7000 in cable after more remarks from Carney this week is a bullish indication. The fundamental landscape clearly still supports a strong GBP. What can turn the sterling tide? Mark Carney, of course.
- Carney’s cable combustion: Is the BOE using sterling as monetary policy? (Forex Live)
- The Calm After The ‘Carnayage’: How To Play GBP Now? (eFXnews)
- Bank of England Minutes (Finances)
- BOE Rates Meeting Minutes Shake up Sterling (WSJ)
- Another GBP/USD Breakout? (Baby Pips)
- Sterling Especially Strong Against the Euro (FaithMightFX)
- Mucking Your Trading Hand (TraderFeed)
Sterling Especially Strong Against the Euro
Sterling is on steroids right now. Carney’s comments late Thursday have resonated with the market with a continuation higher against all currencies. But the GBP strength is not anymore pronounced than it is against the euro with the $EURGBP at levels not seen in almost a year.
This full on breakout is approaching a major zone that has acted as both support and resistance with this currency pair. With Carney and Draghi engaging down very different monetary policy roads remarks, the $EURGBP has the sweet advantage of price movement based on double whammy fundamentals. These are the sweet confluences that long-term trends are made of. It is also a good reason to watch the rhetoric because any change in tone from either Draghi or Carney can stop this current bear run dead in its tracks. But until then, expect this zone around 0.7950 to determine direction in the trading sessions ahead.
The Sterling Digest, 13 June 2014: SURPRISE!
Bank of England Governor Carney has just shocked the market signaling that interest rate hikes could come sooner than the market expects. GBP has skyrocketed across the board on these comments and it should. I just sat in with FXStreet’s Dale Pinkert on Monday saying that UK fundamentals remain strong but I believed that sterling would take advantage of the low volatility and summer trading doldrums to consolidate further. I didn’t think Carney would rattle markets until the August Inflation Report. Instead, he is well ahead of schedule and has put sterling back on track to reach new highs across the board. Already, $GBPUSD has probed 1.7000 and $EURGBP has broken below 0.8000.
- Britain’s ‘boomless boom’ baffles the experts (The Telegraph)
- Mark Carney’s Speech at the Mansion House Bankers and Merchants Dinner, London (Bank of England)
- The Bank of England has good reasons to tighten – in good time (FT)
- Dollar Knifed, Carney With a Dagger (AshrafLaidi.com)
- Sterling and gilt yields rise on BoE comments (FT)
- Carney Rate Hike Talk Drives Over-Eager Buying Of The British Pound (Seeking Alpha)
- Carney’s cable combustion: Is the BOE using sterling as monetary policy? (Forex Live)
- The Cable Zones (FMFX)
- Today’s Appearance in FXStreet’s Live Analysis Room (FMFX)
The Cable Zones
After a short seasonal consolidation in May, $GBPUSD starts June very tentative and hesitant around 1.6750. Because of its year-long uptrend, any weakness of late has been met with bids and, subsequently, price moves higher. However, notice also that rallies continue to be met by sellers. So who will prevail: buyers or sellers? Watch these areas of support and resistance for the answer.
A close above 1.7000 will reconfirm the uptrend and invalidate my current bearish bias. On the other hand, as $GBPUSD weakens, price targets 1.6600-1.6500. In this zone of support, price will either bottom as buyers step in to push price to new highs above 1.7000 or weakness will continue pushing prices lower still. I am a fan of the former scenario because I believe to get above the huge psychological level at 1.7000, $GBPUSD needs to consolidate still to lower levels. Given the price action, this may take all summer.
Read also: Today’s Appearance on FXStreet’s Live Analysis Room (FMFX)
Today’s Appearance in FXStreet’s Live Analysis Room
It was great to be back in the #FXRoom today with Dale Pinkert. As always, we talked all things sterling including $GBPUSD, $EURGBP, $GBPCAD, $GBPAUD, $GBPNZD and $GBPJPY and the recent behavior in these low volatility markets.
As I told Dale, watch how sterling behaves this summer. I suspect we start to get more definitive moves after the summer doldrums.
Check out my previous appearances:
Is There Any Correlation
Forex traders love to compare the cross currency pairs to the major currency pairs. Even those of us who are firmly in the camp that you trade each chart in and of itself, also like to conspire every now and again. The $GBPUSD has been moving higher all year, closing last week again above 1.70. The $EURGBP, however, closed back above 0.80 after already retracing 38.2% last week. Up until this week, sterling had been trading with good strength in both pairs. Two weeks ago, both $GBPUSD and $EURGBP closed above/below their respective big fig levels. Was Friday’s divergent close a signal of a decline in sterling?
Looking at this $GBPUSD vs. $EURGBP comparison chart, we see that these pairs tend to move inversely to each other especially during bouts of GBP strength. This rally of the last several months is no exception. With $GBPUSD already poised at the beginnings of another leg higher, the close above previous its highs is really bullish. If we see new highs in cable this week, we should see $EURGBP move towards the lows again despite the close above 0.80. Likewise, if we see new lows in $GBPUSD on a hold of 1.7050 resistance, perhaps $EURGBP confirms the Friday close and does shoot higher. Mind the calendar and trade what you see.
Cable Clues
I came out of my long position just around break even as the bears trumpet grows louder. I was bullish on $GBPUSD when price bounced off the 50% Fibonacci level last week.
But I missed these clues when price revisited former resistance at 1.6920.
On the rally last week, I failed to pay attention to the 4-hour chart. I liked how the daily chart was setting up but failed to see what the shorter- time frame was signaling. Worse yet, when price failed 1.6850 (my mental stop) I failed to exit my position. I didn’t make my mental stop a physical stop. I put too much weight in the bullish UK CPI, BoE minutes, and retail sales and not enough weight to price action.
Moral of the story: Stick to your rules for getting out of the trade. Technicals trumps fundamentals. Journal your mistakes so you’ll never repeat them.
EUR/GBP On Trend
I really like this break in 0.8130 today. Last week, it was support on that break of former weekly lows at 0.8160. Because $EURGBP is good to produce fakeouts, it was the 0.8130 level that would validate and confirm a true break to new lows.
So I was long last week and we can see several spike rallies on the above 4-hour chart. But when Friday’s price action languished below 0.8160, I became convinced that the $EURGBP remained on trend and I changed my stance.
Despite lower prices in housing, the core CPI number released today hit the BoE’s “eyebrow raise” level of 2%. A 2% CORE CPI will have the BoE watching inflation closely this summer. If this number trends upward, Carney will have to readjust his rate raise timeline just stated recently in the Inflation Report last week. That could be very bullish for sterling and substantiate these new midterm lows.
UPDATE: Oh, The Possibilities
Yesterday, $GBPUSD saw a spike higher that took price to the fabled promise land of 1.7000. And necessitating an update of the daily chart published here on Monday.
