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Pound lower, retail sales reboundThe British pound is in negative territory in the Friday session. GBP/USD is currently trading at 1.3450, down 0.35% on the day. UK retail sales for October surprised the markets, as the gain of 0.8% m/m was the first gain in five months. Clearly good news, but the improvement could well be due to early Christmas shopping rather than a change in the mindset of consumers, who have been slow to spend since the end of the lockdown in the summer. Consumer confidence has been weak as caution is the mantra in what has been a difficult year. On an annual basis, retail sales fell by -1.6%, which follows a read of -1.1% in September. Inflation continues to accelerate as the "transient" narrative seems out of sync with what is happening on the ground. The UK consumer price index hit 4.2% y/y in October, above the consensus of 3.9%. The data will add to the pressure on the BoE to raise interest rates at the December policy meeting. The bank held rates at the November meeting, which shocked the markets, as Governor Andrew Bailey had sent strong hints that the bank would raise rates in order to contain inflation. The BoE is projecting inflation to go as high as 5% in early 2022 before falling lower in 2023. After being burned by the BoE, investors will be mindful about projecting a December rate hike, but it's clear to everyone that the bank will need to raise rates shortly - if not in December, then early in the New Year. With no tier-1 events out of the US today, the markets are focusing on President Biden's choice for Chair of the Federal Reserve, which should be announced on the weekend. Jerome Powell was considered a strong favourite until recently, but Fed member Laura Brainard could be a surprise choice. Brainard is considered more dovish than Powell and would be expected to raise rates more slowly. If Brainard wins, we could see an immediate reaction from the markets and the US dollar could lose ground. GBP/USD has support at 1.3310. Below, there is support at 1.3206 There is resistance at 1.3562 and 1.3710
by OANDA
Dominant currency sentimentHello Traders! BOE rate outlook continues to improves following uk CPI Heading into todays European trading session, the risk tone is mixed. Asia - Pacific indices are weaker, measures of volatility mixed and safe heavens pressured. Leading Asia-Pacific indices to the downside is the ASX 200 at -0,68% followed by the Topix at -0,61%, the Hang Seng at -0,49 and the Nikkei 225 at -0,40 %. The CSI is positive on the session at + 0,05%. In the FX complex, despite the weakness in equities, It's CHF leading to the downside, with JPY also pressured across the board. USD remains the exception, with the currency remaining supported by FED rate hike expectations. Looking ahead, inflation is likely to remain a theme throughout the day, with EU CPI due to be released in todays European session and Canadian CPI due to be released later today. Have a great day! Regards, Vitez
by Vitezabraham
1
GBPJPY Swing trade + Fundamental driversHello Traders! We approached a significant support zone also having a strong fundamental upside bias. Enter at trend line break or the breakout of the zone. Stops below the zone. Take profit at the highs. Fundamental Drivers Great British Pound (GBP) Fundamental Bias: Weak Bullish 1. The Monetary Policy outlook for the BOE The BoE took a hit to their credibility with their November policy decision when the bank voted 7-2 to keep rates on hold and also had a very clear U-turn among some of the recent hawkish comments from the likes of Bailey and Pill. Going into the meeting markets had fully priced a 15bsp hike in 4Q21, and even though analysts and economists were divided on whether that hike would take place in Nov or Dec the bank’s statement and press conference has now seen market expectations for a hike pushed back to Feb 2022. This came from the bank’s dovish tilt regarding growth, inflation as well as a change or tone which said that hikes would be appropriate in the coming months if the labour data comes in line with the bank’s projections. We were anticipating a violent repricing on med-term rate expectations for the past few weeks now, stressing that rates markets were too aggressively priced, but the U-turn from the bank regarding the near-term was surprising and means incoming labour market data will be key in gauging when lift off will occur. When asked about their obvious U-turn, the bank pushed back and said they won’t endorse market rate pricing, but external member Saunders did just that in early Oct. Overall, the bank delivered a dovish tone, and took a big hit to their credibility, which means markets will be a lot more careful with jumping the gun on their forward guidance going forward. A key reason why we have not changed our outlook for the GBP to bearish after the Nov BoE meeting is because the forecasts for both growth and inflation were conditioned on an implied bank rate of 1% by end 2022, which seems highly unlikely. Thus, after this week’s repricing, if rates price in less than 1% by 2022 then the conditioned path for growth & inflation should be higher again all else being equal. 2. The country’s economic developments The successful vaccination program and subsequent reopening of the UK economy was a big positive for Sterling from the start of the year, but with a lot of those positives already in the price and some expectation of stalling growth, the upward momentum will get tougher in the near- term. Also, alongside the BoE’s dovish tilt incoming economic data will be crucially important for markets to gauge the rate path. This incoming week we have the Sep labour report, and with the BoE’s comments that they want to see what the labour market does before acting on rates it means this print will be important, not as important as the October report we get in Dec but definitely one to watch in the week ahead. 3. Political Developments Even though a Brexit deal was reached last year, some issues like the Northern Ireland protocol remains, and with neither side willing to budge it seems like these issues are here to stay for now. There has been heated rhetoric from both sides with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, these are just threats, but any actual escalation could increase the odds of seeing so risk premium built into Sterling. Also keep the fishing challenges with France in mind as well. Japanese Yen (JPY) Fundamental Bias: Bearish 1. Safe-haven status and overall risk outlook As a safe-haven currency, the market's risk outlook is the primary driver of JPY. Economic data rarely proves market moving; and although monetary policy expectations can prove highly market-moving in the short-term, safe-haven flows are typically the more dominant factor. The market's overall risk tone has improved considerably following the pandemic with good news about successful vaccinations, and ongoing monetary and fiscal policy support paved the way for markets to expect a robust global economic recovery. Of course, there remains many uncertainties and many countries are continuing to fight virus waves, but as a whole the outlook has kept on improving over the past couple of months, which would expect safe-haven demand to diminish and result in a bearish outlook for the JPY. 2. Low-yielding currency with inverse correlation to US10Y As a low yielding currency, the JPY usually shares an inverse correlation to strong moves in yield differentials, more specifically in strong moves in US10Y . However, like most correlations, the strength of the inverse correlation between the JPY and US10Y is not perfect and will ebb and flow depending on the type of market environment from a risk and cycle point of view. With bond yields looking a bit stretched at the current levels any decent mean reversion is expected to be supportive for the JPY, so it remains a key asset class to keep track. Have a great week! Regards Vitez
Long
by Vitezabraham
GBPJPY Swing trade that you can take now + Fundamental driversHello Traders! We approached a key level and managed to break an hourly trend line that's enough for a technical entry also having a strong upside bias for the pair. Entry at market or buy stop order at the break is valid. Manage risk below the last significant support area. Fundamental Drivers: Great British Pound (GBP) Fundamental Bias: Weak Bullish 1. The Monetary Policy outlook for the BOE The BoE took a hit to their credibility with their November policy decision when the bank voted 7-2 to keep rates on hold and also had a very clear U-turn among some of the recent hawkish comments from the likes of Bailey and Pill. Going into the meeting markets had fully priced a 15bsp hike in 4Q21, and even though analysts and economists were divided on whether that hike would take place in Nov or Dec the bank’s statement and press conference has now seen market expectations for a hike pushed back to Feb 2022. This came from the bank’s dovish tilt regarding growth, inflation as well as a change or tone which said that hikes would be appropriate in the coming months if the labour data comes in inline with the bank’s projections. We were anticipating a violent repricing on med-term rate expectations for the past few weeks now, stressing that rates markets were too aggressively priced, but the U-turn from the bank regarding the near-term was surprising and means incoming labour market data will be key in gauging when lift off will occur. When asked about their obvious U-turn, the bank pushed back and said they won’t endorse market rate pricing, but external member Saunders did just that in early Oct. Overall, the bank delivered a dovish tone, and took a big hit to their credibility, which means markets will be a lot more careful with jumping the gun on their forward guidance going forward. A key reason why we have not changed our outlook for the GBP to bearish after the Nov BoE meeting is because the forecasts for both growth and inflation were conditioned on an implied bank rate of 1% by end 2022, which seems highly unlikely. Thus, after this week’s repricing, if rates price in less than 1% by 2022 then the conditioned path for growth & inflation should be higher again all else being equal. 2. The country's economic developments The successful vaccination program and subsequent reopening of the UK economy was a big positive for Sterling from the start of the year, but with a lot of those positives already in the price and some expectation of stalling growth, the upward momentum will get tougher in the near- term. Also, alongside the BoE’s dovish tilt incoming economic data will be crucially important for markets to gauge the rate path. 3. Political Developments Even though a Brexit deal was reached last year, some issues like the Northern Ireland protocol remains, and with neither side willing to budge it seems like these issues are here to stay for now. There has been heated rhetoric from both sides with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, these are just threats, but any actual escalation could increase the odds of seeing so risk premium built into Sterling. Also keep the fishing challenges with France in mind as well. 4. CFTC Analysis Latest CFTC data showed a positioning change of +94 with a net non-commercial position of +15047. Keep in mind the CFTC data released on Friday was only updated with positioning data until Tuesday 3 Nov, which means the big flush lower in Sterling after the BoE meeting will only be reflected in next week’s data. Thus, we would anticipate seeing a sizeable increase in net-short positioning following the Pound’s reaction after the meeting. With the week light on the calendar front, markets will turn attention to incoming comments from Governor Bailey (sigh). Apart from that we’ll be keeping a close eye on key technical levels to determine whether downside momentum could be stalling out. Have a great weekend! Regards, Vitez
Long
by Vitezabraham
Pound's woes continueThe British pound has extended its losses in the Friday session. GBP/USD is currently trading at 1.3445, down 0.41% on the day. It's been a miserable week for the British pound, which is down 1.76% this week. The driver behind the pound's slide was the BoE meeting, as policy makers caught the markets off guard when they opted to maintain the cash rate at 0.10%. Governor Andrew Bailey had strongly hinted that that bank would raise rates at this week's meeting, but in the end, the MPC voted 7-2 to stay put, with Bailey among the majority. Bailey noted that the decision had been a "close call", but the markets reacted sharply, with the pound plunging 2.2% since the BoE's surprise non-move. The BoE has said it will raise rates in the "coming months", but is clearly under pressure to make a move soon, and it could be faced with a credibility issue if it chooses to sit on the sidelines at the December meeting. The fact that the BoE is still running a QE scheme while talking about raising rates is also a potential source of confusion for the markets, as the two programmes are inconsistent with each other. In contradistinction, the Fed has no plans to raise rates before it winds up its bond purchase program. Attention now shifts to the US, with the release of nonfarm payrolls later today. The consensus stands at around 450 thousand jobs added, and a reading above the 500 thousand level will reignite talk of an accelerated taper programme and possibly the Fed bringing forward guidance on a rate hike. That would likely give the US dollar a boost. Conversely, a print below 350 thousand will dampen rate expectations and likely weigh on the greenback. GBP/USD continues to break support levels as it falls lower. The pair is testing support at 1.3471. Below, there is monthly support at 1.3253 There is resistance at 1.3570 and 1.3632
by OANDA
GBP/JPY - Slides as BoE DisappointsThe pound plunged on Thursday after the Bank of England left interest rates unchanged and gave the impression future hikes won't be as aggressive as markets had anticipated. For weeks, the pound has performed well and traders priced in one hike this year and at least a few next. But it seems they may have to reconsider and that started today. The pound has slipped against the yen, breaking below the descending channel that it had traded within the last couple of weeks as it pared previous gains. The acceleration of the decline is potentially a signal that this is more than a correction in a broader uptrend. The test of this will be whether it breaks key support around 152.50-153.50, where the 50 and 61.8 fib levels combine with the 55/89-day SMA band and prior resistance. A rotation off here could be a bullish signal in the longer term, while a move below may suggest traders got carried away in the run-up to today's meeting. That doesn't mean we'll settle back in the June-early October ranges as the BoE still looks likely to raise rates at least a few times. But it may be a while before we're scaling the highs of a few weeks ago, again.
by OANDA
1
Euro dips to 3-week low as Fed trimsThe euro is down considerably in Thursday trade. Currently, EUR/USD is trading at 1.1550, down 0.53%. Earlier in the day, the euro fell to 1.1528, its lowest level since October 13th. There were no surprises from the Federal Reserve meeting, as policy makers trimmed the QE programme by 15 billion dollars/month. The move was nonetheless highly significant, as it marks the first tightening in policy since QE was introduced as a response to the economic downturn in early 2020 due to the Covid pandemic. Although the move was communicated to the markets in advance, it was unclear as to how much the Fed would trim, and an amount other than 15 billion dollars could have shaken up the US dollar. The Fed's move was aptly described as a 'dovish taper', in that the Fed continues to maintain a dovish stance as far as future rate hikes and inflation. Fed Chair Powell said after the meeting that the bank would remain patient and wait until the job market was stronger before raising rates, emphasising that the Fed would encourage job growth through low rates. As for inflation, Powell stuck to his well-worn script that the current bout of high inflation is "expected to be transitory" and will ease lower. Powell appears to be odds with the markets, which are far more hawkish and have priced in several rate hikes for 2022. Inflation has been running at 4% over the past five months (double the Fed's target) and it's becoming a stretch to argue that this is a transitory trend, with no sign that inflation will cool anytime soon. What is interesting is that other major central banks are also preaching patience and arguing that high inflation is transitory. Earlier today, the BoE surprised the markets by maintaining rates; the BoE had signalled that it would raise rates in order to contain inflation. However, the BoE echoed the Fed when it stated today that the factors causing high inflation were transient and that it expected inflation to ease in several months. The ECB is also singing from the same hymn sheet - the bank has projected that inflation will be "subdued" in the medium term, and earlier in the week, ECB President Christine Lagarde said that the bank had no plans to raise rates in 2022. There are resistance lines at 1.1658 and 1.1754 1.1501 is providing support. This line has held since July, but was under pressure earlier in the day. Below, there is support at 1.1440
by OANDA
0.8300 Target On the cards for EURGBP! Have a look at the above image (EURGBP M TF CHART): It was crucial that the monthly candle close convincingly below monthly 0.8500 psychological support. Support break and confirmation would likely lead this pair towards the swing low (0.8300) Now looking at the main chart (WEEKLY TF EURGBP), we can clearly see that the price is in a descending channel and likely headed towards 0.83000 level in the near future. However for every trade. a trader needs to evaluate the ideal entry point, SL and TP so that the risk reward ratio aligns in our favor. In this case as per the confluence factors on the chart below are the ideal entry instructions: TP: 0.83000 (swing low) SL: 0.87000 (swing high/channel high/W & M 50 EMA) IDEAL ENTRY TO HAVE 1:1 RR: 0.850000 So as we can see, for this trade to have ideal RR, we need the price to retrace towards 0.8500 level before we can make a short entry. We could see this happen this week as major banks have policy announcement which could make the EURO gain as its too oversold!. This could be a great opportunity to await deeper retracement and have a better RR for this trade. THIS JUST REPRESENT ONE OF MY ANALYSIS AND ITS NOT A TRADE SIGNAL. SIGNALS ARE USUALLY POSTED ONCE THE CRITERIA MEET IN A NEW POST WITH COMPLETE INSTRUCTIONS
Short
by FX618Analysis
GBP/JPY - Time for a correction?The pound has made some incredible moves against the yen in recent weeks, following the breakout from long term consolidation through the top of the descending triangle, after which it surged to more than five-year highs. The rally in the pound has been driven by rapidly shifting interest rate expectations, with markets now pricing in four or five rate hikes by the end of next year in order to combat very high inflation, which is expected to peak above 5% and average 4% over the next 12 months. Naturally, when compared to the yen where interest rates have been rock bottom for so many years and the prospect of that changing looks slim, it's easy to see why the moves in this pair have been particularly powerful. But the pair now finds itself in an interesting position. So much is now priced in for the Bank of England, arguably too much, that should it follow that path, traders appear to be of the view they'd be committing a policy mistake which they'll be forced to reverse. So barring another unexpected spike in inflation, or a sudden burst of economic activity that looks unlikely given the squeeze we're seeing from various sides, what exactly is going to deliver those further sterling gains? That's not to say it isn't possible, particularly against the yen, but the opposite may be more likely after such an extraordinary run if we do see expectations pared back a little, even some profit-taking on those earlier moves. The 4-hour chart may give an idea of what's to come. The consolidation pattern we're currently seeing isn't perfect. There appears to be support around 156 but it's not completely clear. Alternatively, it could be trading in a descending channel, a sign of consolidation. A significant break of 156 may indicate a broader correction, while a break of the channel would suggest it's quite a strong move. A move above the channel would suggest the pound has new life and sight set on those recent highs.
by OANDA
2
#EURGBP Upside + Fundamental driversHello Traders! Early rate hike priced in for the pound, that may not come as soon as expected. So we can see an overstretched position also if we see more vix upside along risk off sentiment that supports the trade as well. Euro (EUR) Fundamental Bias: Weak Bearish Primary Driver: 1. The Monetary Policy outlook for the ECB Rationale: The ECB provided an overall balanced policy decision at their September meeting. They chose to slow the pace of asset purchases, explaining that the current levels of financial conditions allow them to buy assets under PEPP at 'moderately' slower pace compared to the pace of purchases seen in Q" and Q+. However, as expected, the bank made it vers clear that the move was not tapering it was merely a recalibration of purchases (when you plan to perform less QE that's technically tapering but who's counting).The bank raised their inflation projections for 2021, 2022 and 2023, and even though the 2021 projections were arquablynot as high as the markets were hoping for, the more important me-term projections still showed inflation moving to well below the banks 2% target to affirm the transitory view of recent price measures. All in all, the decision was broadly balanced and as a result failed to inspire any meaningful reaction in European assets. For this weeks upcoming meeting, the markets are not expecting any fresh changes as all eyes are on the December meeting. Primary driver: 2. The country's economic developments Rationale: Earlier issues with vaccinations and lockdowns at the start of 2021 weighted on eu growth prospects, with growth differentials against the US an UK still quite wide, despite some of the recent some of the recent strong economic data. Despite the hit to growth, the recent activity data suggests the hit to the economy from recent lockdowns weren't as bad as feared. That alone isn't enough to change the current bearish outlook. Another factor to watch is the discussions among European states to allow the purchase of green bonds not to count against budget deficits. Such a decision could change the fiscal picture drastically and we would expect that to be a big positive for the EUR and European equities. However, in the short-term, EUR traders will be firmly fixing their eyes on the ECB, which is expected to be a bit of an uneventful meeting. Primary driver: 3. Funding Characteristics Rationale: An interesting driver for the euro is its funding characteristic exhibited during risk off sentiment. AS a low yielder ( like jpy and CHF ), the European has been an interesting choice among the carry trades, especially during 2019 it was favoured against high yield EM currencies, and part of the big upside in the euro during the initial risk off scare in march 2020 was attributed to an unwind of large carry trades. recently we've seen the euro exhibit some resilience during jittery risk tones despite usd strength. As more central banks start normalising policy, the euro's attractiveness as a funding current ycould keep it pressure din the med term vs higher yielders. However, it could spark risk off upside if some of those trades unwind. That doesn't make our a safe haven, but as rates climb globally it can become more sensitive to risk. Primary driver: 4. CFTC Analysis Rationale: Latest CFTC data showed a positioning change of +6291 with a net non-commercial position of -12107. The stretched positioning for large speculators we noted the past few weeks have continued to ease, but net shorts are sizable for leveraged funds. Thus, we would not be interested in chasing the euro lower from here without seeing a more mean reversion first. Great British Pound (GBP) Fundamental Bias: Bullish Primary driver: 1. Monetary policy outlook for the BOE Rationale: The SEP policy meeting from the BoE saw money markets rushing to price in a much faster and more aggressive policy path than previously expected. Even though this course falls in line with our bullish bias for the pound, we do think the market is a bit too aggressive too quick right now. The bank did explain that they now see inflation above 4% by Q4 of this year, and the possibility of more sticky inflation was the key reasons why we saw a 7-2 QE vote split with Saunders and Ramsden both dissenting to cut purchases. However its important to note that the remaining 7 members still see inflation as transitory, and the fact that this expect CPI above 4% means any prints that don't come close to that poses downside risks. Furthermore, even though the bank said their expectations of modest tightening has strengthened. the admitted that lots of uncertainties remain.A big one of these is the labour market, where even though the number of furloughed staff have decreased, that decrease has materially slowed from august which poses more uncertainty for the labour market. Thus, even though our bias remains unchanged, and we see the bank lifting rates Q', we do think the over optimistic moves in the money markets poses sort term headwinds. Primary driver: 2. The country's economic developments Rationale: The successful vaccination program that allowed the UK to open faster and sooner than peers provided a favourable environment for sterling and the strength of the economic recovery has meant solid growth differentials favouring GBP. However, a lot of these positives are arguably the same outperformance we saw earlier. With out above comments about money markets, it also means that there is now more risk to the downside surprises then was the case a few months ago. Primary Driver: 3. Political developments Rationale: Even though a Brexit deal was reached last year, some issues like the Northern Ireland protocol remains, and with neither side willing to budge it seems like these issues. On Friday, the EU ramped up some political posturing with report that said they are mulling róterminating the BREXIT deal if the UK triggers Article 16. For now, these are just threads, but with rates markets still very aggressively priced any further escalation could increase the odds of seeing repricing downside in the GBP, so one to keep on the radar after Friday. Primary Driver: 4. CFTC Analysis Rationale latest CFTC data showed a positioning change of +13594 with a net non commercial position of + 1615. Sterling have been a very impressive rebound from recent lows as market s reacted positively to recent BOE comments which sparked additional downside in SONIA futures, which are now fully priced for 15-basis point hike in Q! and about three 25-basis point hikes by end 2022. Even though GBP has enjoyed upside on the tightening expectations, the reasons why markets are pricing ia steeper rate path is out of fear of inflation and not due to a more positive economic outlook, which as we highlighted above does pose headwind for the Pound in the weeks ahead if growth of inflation data surprise lower in the weeks ahead. Have a great week! Vitez
Long
by Vitezabraham
4
Pound yawns after mixed UK dataThe British pound continues to have an uneventful week and the lack of activity has continued in the Friday session. GBP/USD has been trading close to the 1.38 level for most of the week and is currently at 1.3804, up 0.09% on the day. UK Retail Sales declined by 0.2% in September. This is a cause for concern, given that retail sales have now declined for three straight months, pointing to ongoing weakness in consumer spending. Retail sales remain subdued despite the relaxation of Covid restrictions in July, which has not resulted in consumers increasing their spending. On a positive note, retail sales remain above the pre-pandemic levels (February 2020). There was better news from the September PMIs. Both the manufacturing and services PMIs accelerated and beat expectations, with readings of 57.7 and 58.0, respectively. This points to strong expansion in both sectors. The markets have priced in a November rate hike, likely by 15 basis points. Although this would be a relatively small increase, it would mark the first rate hike by a major central bank since the Covid pandemic began. BoE Governor Andrew Bailey is poised to raise rates in order to curb inflation, which is running above 3%, well above the bank's target of 2%. A majority of MPC members are expected to follow suit, but a vocal minority of members are warning that the move is unwarranted and could dampen the recovery and hurt growth and jobs. On Thursday the US posted strong employment, manufacturing and housing numbers, which gave the US dollar a much-needed boost. The dollar index continues to trade in a range between 93.50 and 94.00 and is at 93.67 in Europe. A drop below 93.50 could see the index fall to the 0.93 line. On the technical chart, the upside shows a triple top at 1.3830. A close above this line would leave the pair room to climb until resistance at the round number of 1.3900. There are support levels at 1.368 and 1.3492
by OANDA
1
GBP/USD - Long term consolidation?The next few weeks will be interesting in GBPUSD with the pair seeing the currencies of two central banks intent on tightening going head to head. This is perhaps why it has entered into broad consolidation with the pair once again failing to make a new low, despite breaking back below the 200/233-day SMA once more. The pair rotated strongly off 1.3750 over the last 24 hours but it's already seeing some support. While 1.3750 falls just short of the 50 fib on the 4-hour chart, another push higher would take it into really interesting territory, with the cluster of moving averages and 50/61.8 fib region being a massive test. A move above here could see consolidation continue, with 1.39 being a big test above here and then 1.40. A move above here would see if break out of the consolidation phase and potentially make much larger gains. Ultimately it may come down to which central bank is keener to tighten or, if the risks mount up, which will blink first. Until then, we may have to endure plenty more consolidation, at which point the moving averages on these longer time frames become less useful.
by OANDA
No Signs Of QE Tapering From The BoE Yet (06 August 2021)The BoE’s decision. As widely expected, the Bank of England (BoE) carried out no change to its monetary policy during its meeting yesterday. Interest rate remains at 0.10% with all eight voting committee members voting for no change. Quantitative easing (QE) remains at £895 billion in total. Michael Saunders, one of the hawks of BoE, voted for a reduction in government bonds purchase by £45 billion. Overall positive outlook of the UK economy in the near future. In the quarterly release of the BoE’s monetary policy report, the central bank said that the “impact of COVID on the UK economy fades further over time” although the Delta variant of the virus continues to spread in the UK. The confidence on the economic recovery led to the central bank’s positive revision of its economic projections. Economic Projections: For year 2021, UK GDP: 7.25 (7.25) CPI Inflation: 4.00 (2.50) Unemployment Rate: 4.75 (5.00) For year 2022, UK GDP: 6.00 (5.75) CPI Inflation: 4.00 (2.50) Unemployment Rate: 4.75 (5.00) For year 2023, UK GDP: 1.50 (1.25) CPI Inflation: 2.00 (2.00) Unemployment Rate: 4.25 (4.25) *Figures shown in parentheses refers to projections from May 2021 The BoE expects the UK economy to return to pre-pandemic level during the fourth quarter of 2021. As with the other major central banks, the BoE also felt that the recent rise in inflation is due to transitory factors. With the ceasing of the UK furlough scheme at the end of September, BoE Governor Andrew Bailey highlighted that unemployment was “no longer expected to rise”. He also mentioned that the challenge for the economy now is whether employers can fill up the job vacancies. On the matter of QE. Little was mentioned on QE during this meeting. The BoE said towards the end of its rate statement that “should the economy evolve broadly in line with the central projections in the August Monetary Policy Report, some modest tightening of monetary policy over the forecast period is likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term”. The committee members also intend to start unloading the bond purchased by the central bank when interest rate has risen to 0.5% and will consider to do so actively when interest rate is at least 1%. According to the BoE, interest rate is projected to be at 0.5% by the third quarter of 2024. Hence, it is likely that the central bank will be holding on to its purchases at least in the near future. Interest Rate Projection: 2022 Q3: 0.2% 2023 Q3: 0.4% 2024 Q3: 0.5%
by GH_Lee
GBP/USD Analysis, Bulls vs BearsHello everyone, as we all know the market action discounts everything :) _________________________________Make sure to Like and Follow if you like the idea_________________________________ The GBP/USD has rallied a bit in the last few days where the Pair price jumped from 1.3571 to 1.3971, but the Bulls are struggling to pass the 1.39820 resistance line, if that would happen we could be seeing a big Bullish movement in the market price. The market is showing a lot of Bullish signs tho and is most likely to move in 1 out of 2 different ways in the next few days : Scenario 1 : The market price is trading near the resistance line at 1.39330, if a breakout happens the price most likely will be headed to the second resistance line 1.39820 where it will determine the outcome movement for this pair. If the Bulls were able to stay in control then it could be the beginning of a Good bullish movement. Scenario 2 : The market price is trading near the resistance line at 1.39330, if the bears were able to gain control then we could be seeing the price dropping to the first support line 1.38600 and then a battle will happen to determine the price movement, If the bears stayed in control then a Bearish movement could drop the price to the second support line at 1.37860 and that's were the main test between the Bears and Bulls will happen. Technical indicators are showing Bullish Signs as we see that : 1) The market price is above the 5 10 20 50 100 and 200 MA and EMA (Bullish Sign) 2) The RSI is at 55.37 showing great strength in the market and on its way to the overbought zone, and no divergences were found yet.(Bullish sign) 3) The MACD crossed the 0 line into a bullish state with a positive crossover between the MACD and the Signal line. (Bullish sign) 4) Bull/Bear Power is at 0.0083 (Bullish sign) Support & Resistance points : support Resistance 1) 1.3860 1) 1.3933 2) 1.3836 2) 1.3982 3) 1.3786 3) 1.4006 Fundamental point of view : The Bank of England (BoE) was pretty much as expected, with one dissenter and modest tightening seen over the forecasting period. GBP/USD saw a modest uplift in the immediate aftermath of the policy decision. The move was short-lived, however. In the view of economists at TD Securities, cable should remain fairly well-anchored around current levels. “The MPC voted to leave policy on hold today, with one dissent to reduce QE prematurely. There were two notable changes in the committee's communications: forward guidance was revised to acknowledge that some policy tightening would be appropriate by late-2024, and the sequence of tightening steps was revised, with a lower Bank Rate threshold to commence balance sheet runoff.” “While we would not be surprised to see an upward extension to test 1.3960, cable may struggle to advance much beyond 1.3985 without fresh catalysts.” “Solid support remains in place around 1.3875, with the 1.3835/1.3845 zone as the next attractor to the downside.” According to FXStreet This is my personal opinion done with technical analysis of the market price and research online from fundamental analysts for The Fundamental point of view, not financial advice. If you have any questions please ask and have a great day !! Thank you for reading.
by GabiDahduh
2
GBP/USD Daily Outlook: Hurry up and catch this opportunityThe GBPUSD pair has interestingly managed to break the recent range in order to retest a horizontal resistance area , despite risk-off supporting the US dollar and market worries over the delta virus variant. However, one thing to note here is that new cases are dropping in the UK and hospitalization rates remain low => GBP strength intraday. With the USD focused on the FOMC, where talks could point on tapering by year end or early 2022 (although the August Jackson Hole event could provide more details), the USD should remain well bid ahead of the FOMC. Risk-off, China-US tensions, and lower equities in Asia and Europe (despite strong earnings reports from last week) is another key indicator that supports my USD near-term bullish bias. Enough with fundamentals, let's take a look at the charts. How to trade the pair? The 1-hour chart shows bullish momentum diminishing in decreasing trading volume , and the RSI has formed a bearish divergence with today's high in the pair. The 61.8% Fib remains more or less in-tact (on higher timeframes, today's bull move looks like a wick), and a horizontal resistance area is there to provide another obstacle for buyers. A bearish engulfing pattern is forming right now, so you may still catch this trade. SL near the 78.6% Fib level, and TP near the lower 1.36xx levels (with scaling into the winning position on each lower low.)
Short
by MujkanovicFX
GBP/USD: Complete Weekly Outlook (July 12-16) 🔥My complete weekly outlook for GBP/USD. Leave me a comment on how you would trade the pair, and please hit "LIKE" and follow for more trade ideas like this. Thanks! FUNDAMENTALS: After reaching fresh 2-week highs on Friday, the GBPUSD pair fell sharply overnight as the US dollar firmed with higher UST yields. Markets remain cautious on GBP as the United Kingdom proceeds with their reopening plan, despite a surge in daily infections to around 31k. However, hospitalizations remain low, 90% of the UK population has covid-19 antibodies, and the country is also one of the leaders in vaccination rates. This supports my bullish bias in the currency for the week, assuming risk sentiment remains supportive and the USD continues to slide. Latest Headlines: USD News: - US Dollar Index Price Analysis: Recovery targets 92.85 - US futures mixed ahead of North American trading - Fed's Barkin: If labour market takes longer to recover, tapering goes a little later - Fed's Barkin: Labor market hasn't healed enough to taper bond buying – WSJ - US Dollar Index regains traction around 92.20 GBP News: - GBP/USD: Sterling set to suffer as “Freedom Day” may be less free than earlier anticipated - GBP/USD now targets 1.3900 and beyond – UOB - GBP/USD retreats from two-week tops, flirts with session lows near 1.3885-80 area - Pound Sterling Price News and Forecast: GBP/USD teases 1.3900 on softer USD, risk-on mood - GBP/USD teases 1.3900 on softer USD, risk-on mood - Pound Sterling Price News and Forecast: GBP/USD in a third week of declines? Delta, data and dollar Upcoming Market Reports: Here are the most important market reports for GBP/USD to follow in the coming days (all times are UTC timezone): Tuesday at 12:30: USD CPI m/m (Expected: 0.5% , Previous: 0.6% ) Tuesday at 12:30: USD Core CPI m/m (Expected: 0.4% , Previous: 0.7% ) Tuesday at 17:01: USD 30-y Bond Auction (Expected: , Previous: 2.17|2.3 ) Wednesday at 06:00: GBP CPI y/y (Expected: 2.2% , Previous: 2.1% ) Wednesday at 12:30: USD PPI m/m (Expected: 0.6% , Previous: 0.8% ) Wednesday at 12:30: USD Core PPI m/m (Expected: 0.4% , Previous: 0.7% ) Wednesday at 14:30: USD Crude Oil Inventories (Expected: , Previous: -6.9M ) Wednesday at 16:00: USD Fed Chair Powell Testifies (Expected: , Previous: ) Thursday at 10:00: GBP MPC Member Saunders Speaks (Expected: , Previous: ) Thursday at 12:30: USD Unemployment Claims (Expected: 350K , Previous: 373K ) Thursday at 12:30: USD Philly Fed Manufacturing Index (Expected: 27.8 , Previous: 30.7 ) Thursday at 13:15: USD Industrial Production m/m (Expected: 0.6% , Previous: 0.8% ) Thursday at 13:30: USD Fed Chair Powell Testifies (Expected: , Previous: ) Friday at 12:30: USD Retail Sales m/m (Expected: -0.5% , Previous: -1.3% ) Friday at 12:30: USD Core Retail Sales m/m (Expected: 0.4% , Previous: -0.7% ) Friday at 14:00: USD Prelim UoM Consumer Sentiment (Expected: 86.5 , Previous: 86.4 ) INTERMARKET: Yields: Yield differentials remain supportive for the pair due to the slide in US 2y yields over the last two weeks. This is a bullish sign for the pair. SENTIMENT: CoT: The GBP is one of the rare majors that saw an increase in positioning against the USD in the last week (along with the JPY). Net long positioning in GBP rose to $1.9 billion, but it's worth noting that fast money has reached a 12-month extreme, which poses a downside risk for the pound. Currency Strength Index: GBP is slowly building its bull trend while the USD remains somewhat flat against other majors for the last 6 trading days. Today, risk-off supported the USD and JPY overnight, but the picture is changing ahead of the NY open, with risk currencies (and the pound) recovering some ground and the USD retreating from daily highs. Risk Reversals: While risk reversals are still skewed to the downside, it's worth noting that GBP call options are recovering vs similar out-of-the-money put options, signaling that investors are increasingly protecting against higer prices in the pound. * Comment: In the FX market, risk reversals refer to the difference between the implied volatility of the most popular out-of-the-money calls and puts with the same expiration. Higher demand for an options contract increased its volatility and price. Therefore, a positive risk reversal signals that upside protection in the pair is relatively more expensive than downside protection, suggesting that investors are speculating on a rise in the currency. TECHNICALS Price-Action: GBP/USD broke above a bearish trendline and reached fresh 2-week highs, were sellers pushed the price lower overnight. The pair is now finding support at the broken trendline, near the 50% Fib level of the latest bullish impulse move and a horizontal support area. The short-term trend is turning bullish, but 1.3830 (and 1.3815, the 61.8% Fib) need to hold for buying opportunities to emerge. Pound pairs are famous for their deeper corrections, so the 61.8% Fib may be in play. However, risk tolerant traders may also use the 1.3830 level (which aligns with a horizontal support) to build their long positions. It's also worth noting that today's (Monday) bear run is accompanied with decreasing volume, signaling that a turning point may be near. Levels to follow (Liquidity): Major resistance: 1.3909 (weekly high) Minor support: 1.3815 (61.8% Fib) Major support: 1.3750 (weekly lows and daily trendline) == SUMMARY == UK's "Freedom Day" (July 19 when all restrictions should be lifted by the government) could provide further support for the pound despite higher daily infection rates. The number of hospitalizations and fatal outcomes has been greatly reduced, and the majority of the UK population has covid antibodies, which supports my constructive outlook for the pair. Pullbacks (like the one today) could be used to enter long in GBP/USD. Please hit the 'LIKE' button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
Long
by MujkanovicFX
3
GBPUSD Strategy WeeklyA very similar example here in GBPUSD: Sellers surrendering control; buyers are seeking to restrict the flows with a very bullish close above 1.390x. Both sides are now locked and loaded; Sellers are so compacted from the five months of consolidation (securing a breach of the top of the range is what we are tracking here). After the Daily and Weekly close above 6th July highs, the HH is in, and technical damage should have been done. Sellers have their blockades up at 1.402x/1.403x which is the next target (a poor entry and risk to reward if you are not already in from last week). I mean taking 1.402x/403x would make it very difficult for sellers to defend and also open an attack to the 1.425x highs. On the other hand, a breakdown of the range from sellers would mark a very aggressive high. Finding the correct side in these flows is of utmost importance. To recap as quickly as possible.... We are tracking for continuing pressure on the 'early' sellers, another squeeze with a final move back towards the 1.425x highs later in the year, before we see a lot of profit taking and capital flight back to USD in 2022.
Long
by ridethepig
4
Double Bottom & SupportWith the 'surprising' threat on Dollar, it is rather easy to spot the flows here than one expects at first glance. The lust to expand in euro is perhaps the clearest of demonstrations of how things will follow for Pound and where the advance on this wing is not coming on the dollar side and those caught off-guard will be punished as we enter into summer months. The chain here demands little preparation, a breakout above 1.380x will send indications that the floor has arisen and put us back into the battlefield between our highs (1.422x) and lows (1.378x). This move from sellers is being nipped in the bud, the theoretical targets above are 1.403/1x which is our mid-point in the map, and, of course, the 1.422x highs. Prefer to be a buyer at these levels as long as 1.378x is holding.
Long
by ridethepig
8
Portfolio: Long EURGBPI am going long EURGBP at 86.00 with a stop loss at 85.20 and a target of 88.60 using 2% of capital. I have already articulated in both the latest chart packs that we are seeing pressure on USD and US10Y. This is a good example for us to use to highlight the slightly more cautious tone in GBP. This selloff looks like it has run out of steam around 0.853x and should begin accelerating towards 2021 highs at 0.922x once we break the channel resistance ahead.
Long
by ridethepig
3
GBP/USD Daily Outlook: Pound at the Mercy of the US DollarGBP/USD Daily Outlook. FUNDAMENTALS: The pound has held up against the USD fairly well as the UK government decided to further ease restrictions on July 19. This calmed market concerns over the new Delta virus variant and helped the pound limit losses against the US dollar. However, without any major domestic reports (except BoE Bailey's speech on Friday), the pound could be following the EUR and print further losses if the FOMC minutes charge the USD. Latest Headlines: USD News: - US Dollar Index clings to gains in the mid-92.00s, looks to FOMC - US dollar at the mercy of the market's take on FOMC minutes - US 10-year Treasury yields refresh 19-week low - US urges China, private sector to boost participation in G20 debt response GBP News: - UK June Halifax house prices -0.5% vs +1.5% m/m expected - GBP/USD now focuses on 1.3735 – UOB - Pound Sterling Price News and Forecast: GBP/USD remains depressed below - 1.3800 on Wednesday - GBP/USD teases 1.3800 amid risk aversion, FOMC minutes eyed Upcoming Market Reports: Here are the most important market reports for GBP/USD to follow in the coming days (all times are UTC timezone): Wednesday at 14:00: USD JOLTS Job Openings (Expected: 9.30M , Previous: 9.29M ) Wednesday at 18:00: USD FOMC Meeting Minutes (Expected: , Previous: ) Thursday at 12:30: USD Unemployment Claims (Expected: 345K , Previous: 364K ) Thursday at 15:00: USD Crude Oil Inventories (Expected: , Previous: -6.7M ) Friday at 10:00: GBP BOE Gov Bailey Speaks (Expected: , Previous: ) INTERMARKET: 2-year yield differentials remain neutral for the pair. UST yields move sideways ahead of FOMC minutes. SENTIMENT: Currency Strength Index: TECHNICALS The GBPUSD pair trades in a short-term downtrend after yesterday's strong sell-off, forming a consolidation this morning. GBP recovered some ground after attempting a break down below a bearish wedge on the 1-hour chart, with the 38.2% Fib level providing immediate resistance (1.3820). Markets are cautious ahead of the FOMC minutes which is reflected in the sideways trading in the pair. However, the most recent 1-hour candlestick (pinbar) suggests that sellers are still interested in shorting GBP at attractive levels. Levels to follow (Liquidity): Major resistance: 1.3850 (61.8% Fib) Minor resistance 1.3820 (38.2% Fib) Minor support: 1.3780 (daily low) Major support: 1.3730 (weekly low) == SUMMARY == I remain bearish on the pair based on the reasons mentioned above. Weekly low at 1.3730 might be within range after the FOMC minutes release. Please hit the 'LIKE' button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
Short
by MujkanovicFX
2