Remain short GBP until a consecutive daily close above 1.3317
Updated
GBP rallied over 1.7% today after the BoE surprised the market by not cutting interest rates (priced at an 87% probability!)
Sterling rallied sharply on the news, well above the 23.6% BREXIT retracement level at 1.3317 which had previously acted as key resistance.
Whilst longs were given another opportunity to get long at 1.3292 intraday (slightly in the money at the time of writing), I feel that we are at a key inflexion point and the downside risk prevails unless we see a consecutive daily close above 1.3317
Carney may not have announced a rate cut today, but the BoE is now more likely than ever to cut rates next month, by a full 0.5%. Markets trade on expectations, not the past, and money may still be made on the short side as traders fade today's surprise (short covering). A consecutive daily close above 1.3317 invalidates this idea and provides a potentially bullish pivot to advance towards the next key Fibonacci level at 1.3642
Sterling rallied sharply on the news, well above the 23.6% BREXIT retracement level at 1.3317 which had previously acted as key resistance.
Whilst longs were given another opportunity to get long at 1.3292 intraday (slightly in the money at the time of writing), I feel that we are at a key inflexion point and the downside risk prevails unless we see a consecutive daily close above 1.3317
Carney may not have announced a rate cut today, but the BoE is now more likely than ever to cut rates next month, by a full 0.5%. Markets trade on expectations, not the past, and money may still be made on the short side as traders fade today's surprise (short covering). A consecutive daily close above 1.3317 invalidates this idea and provides a potentially bullish pivot to advance towards the next key Fibonacci level at 1.3642
Note
A close today (Friday 15th) above 1.3317 that provide confirmation of a successful 23.6% retracement, following a consecutive daily and also weekly close above this level.In this scenario upside momentum in GBP should prevail in the short-term, targeting 1.3642 around the 38.2% Fibonacci level. If this fails to transpire, then expect further chop in the coming sessions maintaining the current downside bias.
I remain negative in my fundamental view of GBP and will provide updates of where I feel technically the pound is vulnerable and potentially a great short.
Trade active
Sterling has well-and-truly failed to hold 1.3317 on a consecutive daily and also weekly closing basis. As per my initial note, further downside prevails below this bias (1.3160 last).Note
Yesterday's high of 1.3315 was within 2 pips of the major 1.3317 resistance level. Whilst the danger of a short squeeze is becoming greater with sentiment and positioning so negative, the pound remains suppressed below 1.3317 for the time being.
In the event that the BoE does not cut rates in August, then there would be a sharp correction. You may be best advised to cover shorts ahead of the meeting and trade after the event if a cut is in fact announced as expected.
Note
GBPUSD continues to drift lower following 5 straight days in declineTrade closed: target reached
Short target reached in sterling at 1.28. Now pivoting to a tactical long targeting 1.36.
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