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November 11, 2013November 21, 2013

Central Bank Divergence

ECB cutting rates this month was an aggressive move when most central banks have taken to jawboning under the guise of forward guidance. Action by the ECB definitely puts it squarely in dovish camp and the leader of the pack.The ECB and the RBA are firmly dovish having both cut interest rates already this year and keeping the door to accommodation open. The RBNZ and BoJ are biased dovish preferring to talk down it’s currency rather than take real action. The BoE and BoC are biased hawkish as they awaits for its recovering economies to, well, recover. The $FED, however, leads the hawks with a broken taper promise. However, the chairman-elect may move the $FED away from the edge and back to loving embrace of the doves. LOL. Time will tell.

The Bank of England has been a big game changer for sterling since Carney has taken the helm. I think the market always knew he would bring change to the BoE. However, I believe the market believed Carney would be bearish for sterling. But the markets have perceived the BoE to be hawkish for quite some time thanks, in large part, to UK economic data that have been surprisingly sustainable and robust since the summer. Once Carney set forward guidance in August, the data has kept the BoE on hold with monetary policy. This month, Carney has been outright hawkish in his delivery of the inflation report and following television debut. You have to wonder at his cleverness since those dovish comments as Governor-elect over a year ago.

But you have to love this new landscape. These divergences are what trends are made of! With the end of 2013 fast approaching, we could see these divergences manifest in new trends as holiday volatility increases in the markets. Already we see a massive breakout in the $GBPAUD and EURGBP as these pairs best reflect these central bank divergences. $GBPUSD is a battle of the hawks as moves remain rangebound. Watch how other pairs act as the divergences in central banks become more apparent.

Read also:

USD: WHY YELLEN’S CONFIRMATION HEARING WAS A SUCCESS (BK Asset Management)
How Cable Will Trade Into Year-End Post Today’s More Upbeat BoE IR? – ANZ (eFXnews)
BOE’s Carney interviewed on telly (FXStreet)
BoE upgrades growth forecasts as recovery takes hold (CNBC)
What Are The Markets Whispering for 2014? (FaithMightFX)
More from the BOE Q&A (Forex Live)
The technical case to be greatly bullish on Great Britain (Peter L. Brandt)

November 8, 2013November 8, 2013

A Very Big Deal

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)

November 6, 2013November 6, 2013

GBP/USD Stays Resilient

With cable starting the week below the huge psychological level at 1.6000, it seemed the currency pair was finally gathering steam to make a real break lower to 1.5850. However, 1.5900 remained staunch support and stronger-than-expected UK data has launched the $GBPUSD back above 1.60.

After moving above 1.60 AND holding the 1.6020 level yesterday, $GBPUSD started to look quite bullish. Back in October, a similar move was met with new highs some weeks later. It seems we may have the same price action again in November. Since holding above 1.6020 yesterday, $GBPUSD has made a seriously bullish move to make highs so far at 1.6117. However, there is plenty of resistance above the week’s new highs.

Price has been capped by the 61.8% Fibonacci level with 1.6130 and 16160 resistance levels not too far above that. As long as price remains above 1.59 support and 1.60 psychological level, $GBPUSD has the potential to return to 1.6250 resistance and make a real effort to 1.6300. Another interesting observation is that $GBPUSD has yet to turn bearish even with a daily or weekly close below 1.60. Each time is seems as though the USD will gather momentum, GBP bulls have proven more resilient. Will the bulls finally muster the strength needed to take out the 1.63 highs?

November 4, 2013

EUR/GBP Breaks Down

Last week, the $EURGBP rallied right into the infamous sell zone between 0.8570 and 0.8600. And true to form, that zone held and the $EURGBP broke down last week right to the 50% Fibonacci level of the entire rally.

Being that price is bouncing along the 50% Fibonacci level to open the new week, it seems as though a corrective rally may be in the works. However, given the velocity of the euro’s weakness in the past 2 trading sessions, a rally could be very shallow. I favor a continued move into 0.8430 where the real line in the sand for bears lies. This previous support level also coincides with the 61.8% Fibonacci level making this the level to watch in trading this week. Above current price action is resistance between 0.8480 and the big psychological level at 0.8500. It would take a break below 0.84 or above 0.85 to see momentum in price action. Until then, expect price action to be choppy between these levels and dictated by data releases this week.

Last week the ECB pulled the rug out from euro bulls. While they maintained monetary policy, dovish comments from ECB members sent the euro swooning. The fundamental landscape remains positive for GBP. UK economic data is robust into the fall season proving to bulls that the summer recovery may actually have legs. After a quiet couple weeks, we get a slew UK data this week plus an interest rate decision from the Bank of England. While the market expects the BoE to remain on hold with monetary policy, data this week may cast the central bank in a hawkish light. Price moves will be sensitive to data releases into Thursday’s rate decision. Be mindful of the calendar and key levels this week.

November 4, 2013

GBP/USD Still In Range

For several weeks now, the $GBPUSD has been trying to either retrace to the 50% Fibonacci at 1.5850 or break out higher above 1.6250. Neither has happened as last week 1.6250 resistance capped any rallies and the 1.5900 support level that has emerged in recent weeks has buoyed dips.

This week opens with $GBPUSD again at 1.59 support unable to continue lower. Thanks to the better-than-expected manufacturing PMI release, this corrective rally should find resistance into 1.60 if price is to move lower and finally break the 1.59 support level.

The fundamental landscape remains positive for GBP. UK economic data is robust into the fall season proving to bulls that the summer recovery may actually have legs. After a quiet couple weeks, we get a slew UK data this week plus an interest rate decision from the Bank of England. While the market expects the BoE to remain on hold with monetary policy, data this week may cast the central bank in a hawkish light. Price moves will be sensitive to data releases into Thursday’s rate decision. Be mindful of the calendar and key levels this week.

October 24, 2013October 24, 2013

What Are The Markets Whispering for 2014?

I see 3 major trends for the markets next year in 2014:

Investing in Africa only accelerates
$GBPUSD enters 2014 at the bottom of its 5-year consolidation pattern (strong USD)
The rise of women in finance

Last Thursday, at Stocktoberfest, I presented 2 of the 3 ideas on a panel with Howard Lindzon, Chairman, StockTwits, Christopher Perruna, Director of Project Management at Gardiner & Capital Theobald, Greg Harmon, DragonFly Capital, Cole Wilcox, CEO Longboard Asset Management, and Mike Bellafiore, SMB Capital. Here is my presentation:

(Infographics credit)

October 23, 2013October 23, 2013

The Rise of Women in Finance

Enacted in August by India’s parliament, the Companies Act requires every listed company to have at least one female director within a year, while others reporting minimum revenue of 3 billion rupees ($49 million) have three years to comply.

Almost half of the top 100 companies traded on BSE Ltd., including the biggest two by market value, don’t have a single female member, according to data compiled by Bloomberg. As many as 6,000 women directors will be needed as firms look to fill the seats…

Just off the heels of Stocktoberfest where we heard about the rise of women in finance from DailyWorth’s Amanda Steinburg, Bloomberg breaks news of the Bombay Stock Exchange Companies Act. What excellent timing.

Read more: Women Sought on Boards as Stiletto Groups Grow: Corporate India (Bloomberg)

October 14, 2013October 14, 2013

Big Deal

Friday’s close below 1.60 is a big deal for bears. It marks its first close below 1.60 after rallying for nearly 4 consecutive weeks.

Zooming in a bit to a weekly chart, we can see that a Friday close below 1.60, in most cases, led to a continuation lower.

It is also particularly bearish that the recent rally put in a lower high at 1.6250 than the previous 1.63 top. Perhaps cable will break out of this massive consolidation pattern after all and lead us back to 1.35. Before then, however, the Fibonacci levels on the weekly chart provide a 1st area of support and decision-making for bulls and bears.

October 4, 2013October 4, 2013

What PMI Week Tells Us

You cant make someone change from being either a lefty in denial or a miserable pessimist (ukipers) that dont want a recovery. I for one will enjoy the upturn and reap the benefits with my company as I can already see. Must go work to do

The above quote is a comment on an article in the Telegraph yesterday that the UK economy is recovering at the fastest rate in the world. During the summer, the UK economy showed some great numbers from all sides of its economy. Construction and manufacturing were buzzing, consumers were spending and house prices were rising. From June through August, services PMI numbers surprised to the upside. Even construction and manufacturing had some very robust months which becoming a great sign of recovery as these sectors in particular suffered tremendously during the Great Recession.

UK PMIs

	October	September
Manufacturing PMI	56.7	57.5
Construction PMI	58.9	60.1
Services PMI	60.3	60.4

While this week’s PMI numbers may have missed expectations, these are some strong PMI numbers. All numbers are nicely above 50 indicating a very robust recovery in the UK. In fact, the September numbers were revised upward since 1st reported a month ago. It looks as though the fundamentals have come to reflect what price action has been telling us for the past few months.

So why the selloff this week? $EURGBP has rallied close to 150 pips off the lows. $GBPUSD and $GBPAUD have both tumbled handsomely from their highs. It looks like a classic case of buy the rumor, sell the fact. The market is forward thinking and now that fundamentals support price action, bulls are taking profits.

Sterling is still very much bullish even at current levels in $GBPAUD, $GBPUSD and $EURGBP. However, these corrections have broken key support/resistance levels opening the door for a deeper correction into next week to match these tremendous GBP rallies.

Mentioned above:

UK economy growing at fastest rate in the developed world (Telegraph)

Global PMI Data (Avondale Asset Management)

Australian Dollar Puts In a Bottom (FMFX)

Reality Bites (FMFX)

Respect the Zone (FMFX)

October 3, 2013

GBP/USD In Yet Another Correction

$GBPUSD bulls just won’t give up. Every single time we have honored a previous high as support, we have seen cable take off to new mid-term highs.

Here is Exhibit A, the daily chart from September 19th:

Here is Exhibit B, the 4hr chart a week later on September 26th:

Now here is today’s 4hr chart:

Bulls and bears are fighting it out, yet again, at a former high. Every battle won by the bulls have led to breakout rallies. A battle won by bears could see price fall to the level of support at 1.6130 which is also another former high (See Exhibit B). Below there is 1.6106, the 50% Fibonacci retracement level of this latest bullish wave. I don’t believe bulls will be truly done until 1.63 is challenged. These former highs are excellent areas for bulls to reload and gun for the ultimate prize above 1.6300.

Trade what you see.