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Tag: GBPUSD

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The Sterling Digest, 15 September 2014: ref talk

aye or die!
Manifest destiny?

Of course, the only thing still on the wire is the Scottish referendum. But the Scots stand to rock the world as secessionists everywhere get emboldened by the possibility of independence. Naturally, the referendum polls are just as emotional as the voters they reflect. Sterling spiked to new weekly lows across the board as the Yes vote took lead last weekend. Then the No vote moved ahead as the trading week unfolded and sterling surged big time right back to familiar highs in all the GBP pair majors. Headed into the actual election this week, expect price to actually weaken as buyers take profit and sellers take advantage of the recent highs. Even with the Bank of England set to make a monetary policy announcement, all eyes this week are on the referendum vote. Friday, the day after the vote, will be the most interesting trading day of the week and may set the tone for the rest of the year.

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Is This Really A Trend Reversal

Another slow session, another day this remains true. In order to really belabor the point, I wanted to post the price action that has developed in the past week. The chart pretty much says it all.

gbpusd_8_26_14_8_25_AM

A hold below targets the bottom of the chart long term. This 1.6600 is nearly the 61.8% Fibonacci level on the weekly chart that was broken last week – the ultimate perversion of any long-running trend. The fact that the range top is this critical support level is not lost on me. But there are still bulls out there. Given the breakout rally over the last year, I understand the sentiment. And so the hold below 1.6600 has been met with just enough dip buyers to keep price supported. If strength does build above 1.6600, then a hold above it starts a correction that makes 1.6650 a key resistance zone. If this is really a reversal, price will hold below 1.6650 on any moves to the upside above 1.6600. If bulls really do have some mojo, we’ll see price break higher to 1.6750.

 

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The Sterling Digest, 8 September 2014: divorce jitters

WSJ chart - closing in on the vote
When traders are buying insurance on currency, you know things just got real

The markets have known about the upcoming Scotland referendum for months now. And it was largely ignored because it didn’t seem like anything could break up this unhappy union. Now GBP sterling is looking like a currency union all out of nowhere. No one calculated that kind of government risk from the Old Lady. The market has been taken for a loop. This extreme market reaction may only the beginning because it is yet another changed expectation in sterling’s long-term sentiment. Traders are starting to believe that the market could get more volatile still. What I had thought was a non-event just months ago has thrown another interesting fundamental twist to the landscape. A currency crisis could give this reversal some real legs to undo last year’s sterling rally.

  • The options market saw this drop coming last week. (WSJ)
  • Scotland has to make a clean break. (The New York Times)
  • Super Mario is fearless leading the ECB down the yellow brick road of bond purchases. (Bloomberg)
  • Speaking of fearless, have you met Wonder Woman Yellen? (The Washington Post)
  • This is not a new issue. Did markets miss it or is it actually adjusting to a new reality? (Credit Suisse)
  • Scotland may not be Quebec or Texas. (BK Asset Management)
  • A good look at cable just before today’s gap and drop lower. (Forex Live)

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NFP Quick Look

Headed into the non-farm payrolls, $GBPUSD has put in a significant correction back to 1.6822. Huge level. Not only is the 50% Fibonacci retracement level, it is also a former resistance level now serving as support. GBPUSD DAILY CHART

While the $EURGBP is staging a corrective bounce, it is still contained by its former zone of support now acting as resistance. EURGBP DAILY CHART

The market’s reaction to the NFP may determine a new direction in sterling. Keep an eye on both pairs into this morning’s news release. Trade what you see.

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My Appearance on Benzinga’s #PreMarket Prep Show

I was back on last week with the guys at Benzinga’s #PreMarket Prep Show. I had a blast. Some highlights from our chat include:

  • The market reaction to recent UK news releases
  • How to trade this current selloff in the GBP
  • The use of stops in the current market environment
  • Interest rate expectations going into 2015

Listen to the full interview below.

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Not Yet A Change In Tide

The $GBPUSD finally returned to 1.7000 and closed last week below the big psychological level. Many would find this a bearish signal. And I don’t blame them. Many a trader know the rules of support and resistance. So it is not surprising to find that as the new trading week opens today that we find price meeting offers lined up at the 1.7000 big fig. And that would certainly seem like another bearish signal: price finding resistance at the former support level.

GBPUSD 4 HOUR CHART

The problem with these technical signals is that the fundamental picture remains pretty much the same. Despite the neutral tone and backpedaling from the Bank of England, sterling fundamentals are still strong enough. Yes, the market is reacting to a less-hawkish-than-preceived Carney. But as long as the economic data remains robust, traders will bet on the fact that Carney & Company will have to respond with some type of monetary tightening sooner rather than later. When that realization hits the market, the bulls will step back in.

Read also The Sterling Digest, 25 July 2014: define safe (FaithMightFX)

 

 

 

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The Sterling Digest, 25 July 2014: define safe

It seems to me that the bulls are still safe. Despite the stalling at highs 2 weeks ago and the inevitable selloff this week, sterling looks well-poised to begin its move higher from current levels. The charts look great with the selloff in $GBPUSD right into 1.6950; and the rally in $EURGBP capped by 0.7950. If these areas of support for sterling hold, it could be off to the races as sterling pushes higher again. But has there been a fundamental change that would support further GBP weakness? This rally has been fueled, first, by economic growth and, now, by interest rate hike expectations. The market will, however, pay attention if the data misses reported throughout this month become a trend. And such a trend will temper the market’s expectations for interest rate hikes. What happens when the BoE decides instead to taper its QE program? Or if the $FED does raise interest rates? How safe really is this GBP rally? Consider it is safe for now.

 

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Something Had To Give

Last week was a seemingly anti-climatic week. The $GBPUSD had wild swings in both directions only to really have gone nowhere. It ended the week slightly lower. The $EURGBP has broken lower but no follow through yet. $GBPJPY is also lower after it failed to make a new high after its correction but no new lows. The $GBPNZD broke its range to the upside only to be capped by the larger 1.9750 resistance level.

As the new trading week opens, sterling is on the back foot. Last week’s lackluster was indecision and the market can only remain “stuck” for so long. Something has to give and something always does. But GBP is a mixed bag. While the rally in the $GBPUSD has given way to risk for a bigger sell-off, the $GBPNZD looks poised to move higher.

GBPUSD DAILY CHART

GBPNZD DAILY CHART

The $GBPJPY has also bounced nicely off the lows.

GBPJPY DAILY CHART

And the $EURGBP has become a battleground between $EURUSD weakness and $GBPUSD weakness.

EURGBP 4 HOUR CHART

 

The release of the Bank of England minutes, retail sales and Q2 GDP this week will either sink or boost sterling. If the minutes reveal any hawkish hints, particularly any votes for a rate hike, any chance for a correction are over. However, if the minutes turn out to be another non-event, retail sales and GDP become much more important. I think it would take a miss in both those releases to turn the tide on sterling. Watch the charts. Mind the calendar. Trade what you see.

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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.

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