BOE
ORBEX: Pre-BoE GBJPY, Post-Fed USDMXNIn today's #marketinsights video recording I analyse #GBPJPY and #USDMXN!
#Pound Remains Solid:
- MPs support 3-month extension
- Monthly CPI rise not as expected, but improved
#Yen Likely to Weaken:
- BoJ held rates unchanged but acknowledged increasing risks
- Ultraloose policy to be re-examined at October meeting
#MXN Supported By Fed:
- Emerging currencies will benefit from rate differentials
- Oil is bid and likely to move higher
Stavros Tousios
Head of Investment Research
Orbex
This analysis is provided as general market commentary and does not constitute investment advice
GBPUSD POSSIBLE REVERSAL @ 1.2500In another two days Sterling going to face Major central bank meetings. As my point of view still sterling in corrective phase only both sort and medium term.
I am looking for sterling reverse from 1.2500 psychological level.
GBP/USD: Hot or Not ?GBP/USD: hot or not ? The trend remains downward in the short/very short term. After breaking down the static support at 1.264 identified by 23.6% of the Fibonacci retracement, the next target targeted on this currency pair is the support area at 1.25. Reachable today as analysts expect a recovery of the intraday US dollar ahead of the publication of positive nonfarm payrolls.
So technically, the price should go to test the support in the 1.25 area by todays closing and, should it be violated to the downside. It could mark a new period minimum in this 2019 going beyond the 1,237.
Basically this hypothesis is the most likely in the short term as the strong uncertainty around Great Britain due to Brexit. A rebound at the moment is not expected. Except for even more expansive scenarios of monetary policy from the Fed.
To summarize
GBP/USD: hot or not ? Maybe not. We recommend a short entry on this pair. The first target is in area of 1.25. The second target is in the intermediate area at 1,244. So the final one is at 1.237.
1700 per ounce of gold, another crisis signal, Powell's speechFed’s monetary policy vector changes, the pressure between the US and Iran has reached a critical level, the overall high level of investor concern led to the fact that gold almost reached 1140 yesterday. As a result, an increasing number of traders and analysts are turning into purchases. In particular, Marc Chandler from Bannockburn Global Forex believes that a breakdown of 1400 opens the way for gold to 1700. We are far from being so optimistic and we will look for points for its sales.
In the meantime, analysts are continuing to look for signals about the coming crisis. Earlier, it was the inversion yield curve inversion, the departure of the Real Monetary Proposal to zero, the cycle theory, the decline of America's auto industry. The Fed is changing its approach to monetary policy by changes tightening and so on... Small-cap companies, as well as transport company stocks relative to the SP500 index dynamics, have shown the worst dynamics since 2009 (!). In theory, small-cap companies should grow much more actively than high-cap companies. And we are now seeing a kind of inversion. This inversion, according to analysts, is a disturbing signal and is a harbinger of the coming crisis.
Data from the United States came out quite weak. New home sales also disappointed with 626k, missing expectations of 684k, as was the Conference Board said its consumer confidence index dropped 9.8 points to a reading of 121.5 this month, the lowest since September 2017.
Jerome H. Powell, chairman of the Federal Reserve, said Tuesday that the downside risks to the US economy grew, but he avoided the topic of lowering rates. So the dollar received some support. Therefore we will use this dollar growth solely for the purpose of selling it more expensively.
Today, surges of volatility in pound pairs are quite possible. The Bank of England (BOE) inflation report hearings will hog the limelight this Wednesday. Governor Mark Carney’s testimony will be closely heard, in the face of the recent dovish tilt. Note that the hearings will be on the May inflation report.
In addition, data on orders for durable goods and the US trade balance may well lead to the formation of local trends in dollar pairs.
Our trading preferences for today: we will continue to look for points for sales of the US dollar against the Japanese yen, euro, and pound. We continue to wait for a gold correction and look for points for its sales. And also we will actively sell the ruble both on the intraday basis as well as medium term.
Tough week for foreign exchange market: the Fed, the BoJ & BoELast week turned out to be not that difficult. For instance, the data on industrial production was better than expected, also the data on retail sales appeared better as well, but still not that good. The Michigan Consumer Sentiment Index (MCSI)came out below forecasts, but the difference was minimal, and the dollar strengthened fairly well in the foreign exchange market on Friday.
The dollar growth has been observed due to the Fed's possible future actions. This week the US CB is announcing the monetary policy decision. On the one hand, the weak data could convince the Fed to reduce the rate but on the other hand, Friday's data seems to have more influence in taking the decision.
The Bank of Russia lowered the rate on Friday. Due to the economic situation in RF as well as the current decline in oil prices, we continue to recommend sales of the Russian ruble.
The data on industrial production turned out to be lower than expected (5.0%, with a forecast of 5.4%). However, the weak data was offset by exceeding retail sales forecasts.
The companies are concerned with the consequences of the trade war. Therefore, more than 500 companies and industry trade associations wrote to the White House urging Trump to remove levies on China and end the ongoing trade war.
This week we are waiting for announcing the results of the FOMC meeting, BoJ and BoE decisions on monetary policy parameters, data on inflation statistics ( Eurozone, the UK, and Canada ) as well as data on retail sales from the UK and Canada.
Our trading preferences are unchanged: we will look for points for selling the US dollar primarily against the Japanese yen, as well as the euro, selling oil and the Russian ruble, as well as buying gold. We will look for points for buying GBPUSD with small stops.
Selling the CrownThe heavy selling is continuing in Cable today... What is scary is so far it has mostly been coming from the dollar side, we are yet to see the destruction via Brexit and the loss of market access.
Technically, the underlying structure remains the same...meaning breaking 1.3109 today will develop 1.280, 1.266 and beyond very quickly.
An update to Cable ahead of the voteThe vote is kickstarting at 7:00pm GMT and I am still expecting another defeat here. What is necessary to track today is the severity of the defeat and the reaction of the DUP party.
Odds of any deal passing today remain at 17%.
The main issue for PM May is the slim majority she is barely holding onto. The deal will likely pass eventually, although we might have to see more economic pain in the UK for the DUP and other Labour Brexiteers to follow suit first... This pantomime may take till the summer.
If it is voted down (expected today), then the next stage for parliament will be a vote on whether the government supports leaving a “no-deal” option on the table tomorrow and on Thursday the UK Government will vote on whether they should ask for a delay to the Brexit date.
For those trading Sterling, we are almost back to the original entries of our shorts earlier in the month with late sellers getting caught underwater.
Best of luck those trading the event live, here looking for more positions on the sell-side.
Cable soft ahead of NFPDollar catching a strong bid after yesterday's ECB.
A very dovish Draghi sending shockwaves across financial markets, capital flight to the dollar continues via default as the only game in town.
1.31 was the level to track for the breakdown this week, yesterday we officially broke and now 1.24 is in the scope. For today's NFP we are expecting an inline report, a solid 185k payrolls report with a slight uptick in wages.
Best of luck those already short, we are looking for the home-run here.
Art 50 extension likely...an update to CableHere we have an update to the Cable chart.
The UK going back to the 1600’s as odds of another vote on PM May’s deal in the House of Commons this week are very low. For a house of “Commons” they are certainly lacking “common sense”.
... The rules are that two votes on the same motion are not permitted during the same parliamentary year. This means PM May will have to wait till July before being able to put the vote forward again.
Obviously this can change if we see any changes in the majority support, however, as things stand we are on track for a no-deal Brexit from a legal perspective….The big question remains whether the EU will approve the extension. Odds of a long extension are creeping higher (67%) meaning pressure on the Brexiteers will increase massively to such an extent that they are forced to back May’s deal.
Remember up until now we have been trading the conjecture leg of Brexit. The damage so far has come only from uncertainty, we have yet to experience the main impact of losing market access on the economy.
Best of luck those who are positioned on either side for this result... we are going to see some fireworks!
No time to pause...The EU offering a very short unconditional extension of the Brexit deadline as expected with the possibility of an extension till 22nd May if the House of Commons pass the WA before that. If the House of Commons rejects PM MAY’s deal, the UK will either leave on 12th April or need to come up with an alternative way forward for the EU Council to consider (participation in European May elections etc).
As things stand a long extension seems more likely than the deal passing as the HoC by majority voted to take no deal Brexit off the table, watching very closely the responses in British politics for any changing of sides as we get closer to the final whistle.
On the Central Bank front yesterday we had a muted BOE as expected via political uncertainties.
Best of luck all shorts
"Doves" it even matter?A "dovish" surprise from the Fed yesterday ...but does it really matter?
Well the removal of 2019 hikes is worth highlighting because it does not fully support the story we are being told from macro data meaning the bar is set high for any further hikes.History tells us it’s very unusual for the Fed to pause for a long time in hiking cycles before resuming meaning this is likely the end of hikes in the cycle.
In Brexitland, PM May playing politics with a " Queens Gambit "…by asking for the short-extension till the end of June she is trying to force MPs hands to vote for her deal. Options from the EU are still either for (short) Mid-May or (long) lasting into 2020. The risk scenario which will send Pound flying down across the FX board is that the EU reject an extension.
Expecting a muted BOE today, no hikes with the MPC judging further tightening warranted over the forecast horizon... same old story till we clear the political mess.
For those who are positioned from the previous ideas in GBPUSD, GBPJPY, GBPNZD and EURGBP it's time to trail stops and sit tight, markets are pricing a higher risk of a no deal Brexit again.
Same targets for the drama, for those following I will be covering the BOE live in RTP ... good luck guys.
GBPUSD Imminent RallyZoom in this chart to notice PA on a lower TL.
The GBP is an undervalued currency since the Brexit vote 2yrs ago , this decline means it holds a notional bullish sentiment. The BoE has maintained a hawkish stance amidst the geopolitical hurricane subsequently favouring a strong pound. We choose to look for rallies based on this fundamental bias. The charts too suggest that the long decline is running out of steam till later. Looking left of the weekly chart (use this one) you will notice that Elliot wave 5 is complete and we are now in the corrective (ABC) zigzag phase till fib approx.161.80% to 261.80%, other analysists might see a triangular formation on the daily chart. For what you know, we even might have already begun wave 1 of the next impulse wave. Watch the space!!
Buying Levels; Watch out for stop hunt spikes at 1.29900 or at the all time Mother of support 1.29000
Keep the Stop tight around 20 pips.
TP as mentioned, Use fib levels, daily pivots and top of the channel.
TP1 = 1.30480
TP2 = 1.32000
TP3 = 1.3700 (Extreme), DAIM! you need bags of patience for this!
Happy trading folks :)
No deal on the Table: GBP become space dust moving lower (10%) FX:GBPNZD
Technicals
1. Unable to break above 50-EMA 'Monthly Chart'
2. Not on this chart, however, GBPNZD rejected 61.8% Fibonacci
Fundamental
1. Kiwi dollar has been weak over the last 2-weeks, post-RBNZ dovish 'reality check'
2. GBP requires another 'reality check' too and moving lower (10%) has the capacity to hit the British. All GBP pairs require some urgent repricing to match current capital exodus and lack of investments for the UK economy to recover.
Risk Stance
A) Willing to risk (400)-pips
Reward Stance
B) Positioned to take home 1600-pips
From Downing Street with LoveHere we go again guys you know what to do....same plays from the loading zone...by now I hope most are locked and loaded in full positions.
Unfortunately we have more Brexit politics in play with PM May sending a letter to the EU council asking for an extension this morning.
From good sources the EU will accept on the assumption May can get her deal through Parliament by mid-April, otherwise, we are left with a choice between a long extension into 2020 or a no-deal. It is fair to say any extension seems more or less priced in at this point so not expecting much after the knee-jerk on the headline.
Expecting the Fed to lower the “dots” signalling one hike in 2019 … a “one and done” approach. June seems unlikely now as the Fed has started to focus on inflation to keep equity markets happy.
My base case is for a hike in December meaning the dollar looks underpriced at current levels and with a lingering ECB easing risk premium EURUSD will start the leg lower after we clear Fed and PMIs.
An update to EURGBP for BOENow is a good time for a quick chart update ahead of the BOE and Brexit countdown.
PM May playing politics with a "Queens Gambit"….by asking for the short-extension till the end of June she is trying to force MPs hands to vote for her deal... Options from the EU are still either for (short) Mid-May or (long) lasting into 2020. The risk scenario which will send Pound flying down across the FX board is that the EU reject an extension.
We are tracking the same flows towards the top of the range here, and confidence is increasing after the break yesterday. The damage is almost done technically, a rally through current levels will leave us past the point of no return.
The first targets cleared and now 0.8841 remains the second target which is in play as early as this week. Well done everyone riding this one from the lows, it's not the time to start adding longs if you are not already positioned.
Best of luck!
EURGBP Flash Crash Coming Soon..The previous idea "Strengthening the immune system" received a lot of traction and it is time for a quick update here ahead of the vote in HoC today.
Volatility remains very high in the cross, and after the sharp drop overnight the ladder has been cleared for a move back through
resistance at 0.8670.
Watching this very closely and we have the potential for a huge move to the longer-term key area of interest with a Hard Brexit which remains in the region of 0.97 - 1.00.
Good luck.
GBPJPY same plan as beforeHere we are tracking a very similar move to before (see attached: "GBPJPY Shorts on Hourly Chart") on the hourly as bulls become exhausted and unwind their positions for the triple whammy votes this week.
Brexit continues as the driver of Sterling for now, on the UK side we have more votes coming next week so eyeballing a test of the lows beforehand. For those following the updates on Japan you will know we have fiscal year end repatriation flows in play there so we have all the ingredients for a fast leg.
Best of luck those positioned on the sell side.
Traditional Morning Cable UpdateAs expected… PM May defeated on her Brexit deal. Although a smaller margin than the first time, with highlights coming from David Davis switching sides and a softer Jacob Rees-Mogg.
Round 2 is in play for the House of Commons tonight. The house are voting on whether it supports leaving the EU without a deal. Markets are overwhelmingly expecting this to be rejected, leaving the possibility of a Brexit extension (round 3) tomorrow the most likely scenario.
I must stress that a one Quarter delay to Brexit should not be viewed as anything other than kicking the can further down the road and postponing the inevitable economic pain that is coming. The extension will offer a third attempt of getting May’s deal through…unbelievable right?… but it is what it is.
The pressure on brexiteers to deliver Brexit is mounting and my base case is for the deal to eventually pass meaning the UK will leave the EU with a Hard Brexit and the Pound will have to devalue to offset the immediate loss of access to the global trade stage.
Here I am remaining short and continuing to load any soft rallies above the 1.32 handle. We are unlocking the floor after this week, best of luck those who are already positioned and those who are loading!
Thanks again for all the support!
Very clear path for GBPJPY We have a very similar setup to that in GBPNZD (see attached: "Expanding Diagonal in GBPNZD" for more information on the technical side as we will not be covering that here).
As expected the House of Commons rejecting the idea of a no-deal Brexit yesterday (although by default unless there are any changes we are heading for this outcome so it still remains in play). From the fundamental side, nothing has changed. As per today the UK is still set to lose market access with the block, meaning no withdrawal agreement and no transition period.
This will push inflation through the roof, drowning consumers, meaning household spending will remain weak throughout the forecast horizon. Weak wage growth and less credit capacity do not leave the UK in a comfortable position regardless of how the media is trying to sell this story.
In any event, the third and final chapter of the Brexit votes is commencing today. For this one we are tracking whether the HoC can agree on asking for an extension of Art. 50. From very good Westminister sources I can confirm PM May is seeking a two-month extension, however, even if the vote passes the EU are not optimistic with elections around the corner and are unlikely to play ball.
On the Japanese side, the fiscal-year-end repatriation flows to JPY have begun. This is a seasonality flow occurring mid-late March every year as Japanese companies repatriate foreign assets ahead of March earnings.
Best of luck!
House of Commons Round 2Round 2 is in play for the House of Commons tonight. The house are voting on whether it supports leaving the EU without a deal. Markets are overwhelmingly expecting this to be rejected, leaving the possibility of a Brexit extension (round 3) tomorrow the most likely scenario.
Expecting a soft rally on the thought of no-deal being removed. A nice pipe-dream and worth selling with stops above yesterday's high in my opinion.
Lets see how this one plays out. I leave some more pending sells above 1.32.
Dissecting the entire move in Cable (live)We have some time ahead of "House of Commons: Chapter 2" later today so it is a perfect opportunity to start dissecting the moves in cable that have been traded live in Tradingview.
Our first position on the sell-side came in at 1.329 (see attached idea "Selling cable with incoming dollar strength") as we were expecting the highs to be set as markets finished pricing in the expectation of at least a one-quarter 'delay' of Art 50. This '((iii))' leg finished after an inline/soft NFP with 20k jobs killing the flows.
After another soft rally before the "meaningful" vote yesterday we re-engaged selling at the 1.326 level (see attached "An update to cable ahead of the vote"). Those who are paying attention to the 1.311 target managed to book some profits, I know a few from the Forex chat did, which gave us the '((v))' part in our sequence.
Finally we are arriving for the 2nd leg in the 5 wave sequence, we are outguessing that the highs of "iv" will not be taken and looking to swing the enter positions initially towards the 1.28/1.29 area with targets beyond that at 1.24 and 1.21.
Lets see how it goes, feel free to open up the comments below if there are any queries.
Birds Eye View of GBPCADHere we are sitting at the top of the channel after the huge miss in CAD data. This move will be from the Pound side, as Brexit becomes ever closer and thus the pain to the UK economy.
The soft data in Canada is showing no signs of reversing however I am retaining the bullish CAD view as the underpricing of a hawkish BoC. Capacity constraints and labour market tightness will lead to further hikes.
Good news from the US-China trade front will help this pair too via Oil and risk sentiment stabilising.
Best of luck guys...Please remember to like and comment to open the discussion.
