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Tag: GBPCAD

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Majors Meltdown

Ivaylo Ivanov of SocialLeverage50 tweeted this sweet currency chart this morning before the US open. With 1 more day until it ends, it pretty much sums up the entire 3rd quarter of 2014.

stocktwits chart posted by ivanhoff
Everything at their chart extreme except for pound

Which surprised you the most? Sterling has been pretty resilient to the USD strength as it found favor in the face of a majors meltdown. The currencies of the G10 all melted this quarter and all to pretty significant support levels. Except for the pound sterling. Even the mega rally in the USD is at a significant resistance level. Is GBP a laggard? Or the exception? A signal of future strength in the currency? Or future weakness?

Source: Image credit

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The Scottish #IndyRef

IMG_4150.JPG

My first reaction was that market doesn’t care about my take so why would I have one. Each day, I attempt to approach the markets with humility because I don’t want to fall in love with a bias that will beholden me to a position. But if I’m really honest with myself, of course I have a take on the referendum!

I don’t think the Scots will go through with it. And if I’m right the market will flail about for a few hours, or days, and go back to trading the status quo. And the stays quo is that the economy is not as strong as it was a year ago. Wage growth, the new forward guidance, is tepid at best. No matter what Carney says, I don’t think he can convince a majority of the MPC to raise internet rates until there is more proof of inflation beyond house prices. In fact, the weakness in commodities actually buys the BoE some time as energy prices are even less of a drag on inflation than they’ve ever been before.

If the Scots prove me wrong and vote in independence, then the pound sterling will weaken fast and sharp across the board. A currency crisis will literally materialize in a matter of hours as markets deal with a sudden GBP currency union or a new Scottish currency.

So, in conclusion, my take is bearish GBP. But I know the markets can do whatever they want to do. So whatever you do with this “insight”, please do mange your risks appropriately and trade what you see.

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Image credit

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The Sterling Digest, 11 July 2014: stalling

Stock market cartoon from Twitter
Bulls are stalling

Advancement in the GBP trend has stalled this week. Manufacturing and construction data missed this week and the Bank of England’s hold on monetary policy turned out to be a non-event. Sterling weakened briefly on the policy announcement but momentum never really took hold in either direction. Dips were bought but highs were also met with enough offers to keep price capped for another week. This stalling, sideways action is simply consolidation of the bull rally that has gained strength in the past month. Now as the 1st full week of trading of the 3rd quarter comes to a close, sterling remains in a tight range. Despite the tepid price action this week, sterling remains fundamentally strong. Between the US Federal Reserve and the European Central Bank, the BoE looks tremendously hawkish. Until that contrast changes, it is enough to keep sterling supported long term.

Image credit

 

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The Sterling Digest, 13 June 2014: SURPRISE!

Bank of England
BoE preps market for rate hikes

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.

Image credit

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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:

 

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The Week Ahead In Charts

Last week, Janet Yellen changed the game. This supposed uber-dove fooled us. She came out hawkish without really rattling markets. She is reigning in the USD. Contrary to those that say she’ll retract later, markets may come to find out that Yellen is serious. She is much more hawkish than the market ever expected. Can the USD strengthen on this change?

GBP/USD

$GBPUSD declined last week to 1.65 even breaking below the big psychological level on the back of Yellen’s hawkish rhetoric last week. The technical picture looks broken as cable closed the week below 1.65 for the 1st time since January. Price breaks the 61.8% Fibonacci level at 1.6467. It looks like another failed breakout on the weekly chart. Just when cable had everyone yelling for 1.70 (even yours truly), markets once again make a sucker out of everyone. If $GBPUSD is unable to find support above 1.6500, this would signal a reversal back to 1.6250. Is the Yellen spark enough to break that level? That’s the more interesting price action for market sentiment. And the Yellen FOMC just became the 1st central banks to raise interest rates AND remove QE.

GBPUSD WEEKLY CHART

EUR/GBP

The $EURGBP has managed to stage a rally higher than expected finding resistance right at the 0.8400 level. Price now remains trapped in a range between 0.8330 and 0.8400. However, it seems that the EUR will find difficulty rallying in the face of weak economic data and a still dovish ECB. If price breaks below 0.8330, losses could accelerate back to the 0.8250. But it remains to be seen how much EUR can really rally on its own fundamentals. This may be the only currency that sterling can rally against. If 0.8250 holds then we’ll be back to these levels again with resistance at 0.8400.

EURGBP WEEKLY CHART

GBP/CAD

Canadian data continues to support a weak CAD which only continues to support the $GBPCAD at its 2014 highs. However, this pair is having a difficult time breaking any higher above 1.8650. Price continues to pivot around 1.8500. The fundamentals in this pair continue to favor the bulls. But can it really rally when GBP is weak in all the other pairs. I’m not so sure.

 GBPCAD DAILY CHART

GBP/NZD

There has been a major breakdown in the $GBPNZD causing a reversal on the daily chart. During the consolidation of the $GBPUSD, the $GBPNZD was holding up quite well in its own consolidation. But the effects of the Ukraine-Russia conflict have sparked a rally in commodities and with it the NZD. As such, the correction that was taking place in the $GBPNZD and finding support at 1.9500 broke down further last week. Price managed to completely reverse this year’s rally moving to back to lows on the daily chart. The level to watch is 1.9100. A break below  moves prices toward 1.9000 with major support at 1.8850. However, if price finds support at 1.9100 then it moves back to 1.9500. Watch out also for intervention from the RBNZ if the NZD continues to find strength.

GBPNZD WEEKLY CHART

GBP/AUD

The $GBPAUD is benefiting even more from the rally in commodities even as the Chinese economy, Australia’s biggest trading partner, continues to slow. There is also a massive head and shoulders chart pattern on the daily chart that many traders are looking to resolve to even lower levels. Based on this chart pattern, price could decline to 1.7600 which is the huge 61.8% Fibonacci retracement level on the weekly chart. Even a 400-pip decline from current levels wouldn’t change the bullish bias on the long term chart. But will the RBA allow the AUD to strengthen that much? RBA intervention is a real possibility if $GBPAUD breaks this support at 1.8000.

GBPAUD WEEKLY CHART

GBP/JPY

Despite the bull trend on the daily chart, $GBPJPY has fallen below the big psychological level at 170.00. Even while the pair is finding support at 167.50, a break below 167.30 signals a price move to 163.80/164.00 support. Only a close back above 170.00 can change this new bearish sentiment in the $GBPJPY. A move lower will be choppy as the bull trend no doubt still has many buyers  with the $GBPJPY still only in a shallow retracement.

GBPJPY WEEKLY CHART

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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.

GBPUSD vs EURGBP comparison on 4hr chart

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)

 

 

 

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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.

GBPUSD DAILY CHART

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.

EURGBP DAILY CHART

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.

GBPCAD 4-HOUR CHART

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.

GBPNZD DAILY CHART

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.

GBPJPY DAILY CHART

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The Week Ahead In Charts (FMFX)

 

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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.

GBPUSD DAILY CHART

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.

EURGBP DAILY CHART

 

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.

GBPCAD DAILY CHART

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.

GBPNZD DAILY CHART

 

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.

GBPJPY DAILY CHART

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.

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