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Eur-gbp

EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Accelerating policy normalization in deed, but just don’t call it that. The March ECB meeting saw the ECB surprise markets by speeding up their normalization pace with the APP set to increase to EUR 40bln in April and then lowered to EUR 30bln in May and EUR 20bln in June, with an aim of ending APP in Q3. This was quite a shift, and alongside 2024 HICP expected at 1.9% it meant a hike for 2022 is still on the table. However, even though the statement was hawkish, the ECB tried very hard to come across as dovish as possible, no doubt trying to get a soft landing. The bank broke the link between APP and rates by saying hikes could take place ‘some time’ after purchases end (previously said ‘shortly’ after they end). President Lagarde also stressed that the Ukraine/Russia war introduced a material risk to activity and inflation (and it’s too early to know what the full impact of this will be). As a result, she stresses more than once that their actions with the APP should not be seen as accelerating but rather as normalizing (pretty sure going from open-ended QE to done in the next quarter is accelerating but maybe owls play by the different rules). To further add dovishness Lagarde also said that the war in Ukraine means risks are now again titled to the downside, compared to ‘broadly balanced’. After the meeting STIR markets and bund yields jumped to price in close to 2 hikes by year-end again, but the dovish push back from Lagarde saw the EUR come under pressure, failing to benefit from higher implied rates. 2. Economic & Health Developments Recent activity data suggests the hit from lockdowns weren’t as bad as feared, but Omicron restrictions weighed on growth. Differentials still favour the US but interestingly has turned positive against the UK. The big focus is on the incoming data to offer further clues of possible stagflation, where the ECB could be forced to act on rates due to higher inflation but would negatively impact demand and growth as a result. There’s also focus on the fiscal side with ongoing discussions to potentially allow purchases of ‘green bonds’ NOT to count against budget deficits, and the possibility of major new debt issuance to finance energy purchases. If approved, this can drastically change the fiscal landscape and would be a positive for the EUR and EU equities. Geopolitics Even though the EUR, through Western sanctions, have dodged potential weakness from the CBR selling the EUR to prop up the RUB, the single currency was not immune for long. It held up okay initially, but as proximity risk to the war and economic risk from supply constraints and sanctions grew, the risk premium ballooned, sending EUR risk reversals sharply lower and implied volatility higher. With very big moves lower already, chasing the lows aren’t very attractive, but picking bottoms is equally dangerous without clear catalysts. 3. CFTC Analysis Some bullish sentiment signals from last week’s positioning changes with Large Specs increasing longs while leveraged funds decreased shorts. Still trading close to recent lows means speculative EUR longs versus the GBP and CAD looks interesting but doing so without catalysts at this stage is very risky. GBP FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy In March the BoE hiked rates by 25bsp as expected but delivered a bearish hike with BoE’s Cunliffe dissenting by voting to leave rates unchanged. This was a stark change from February where 4 members voted for a 50bsp hike. Cunliffe noted the negative impacts of higher commodity prices on real household incomes and economic activity as the main reason for his dissention, while remaining members thought a 25bsp hike was appropriate given the tight labour market and risks of second round effects. Even though inflation forecasts were upgraded to 8% in Q2 (previous 7.25%), the negative view that GDP was expected to slow to subdued rates showed growing concern of stagflation. The most bearish element of the statement was a change in language regarding incoming rates where the bank said they judge that some further modest tightening MIGHT be appropriate where previous guidance said more tightening was ‘LIKELY TO BE’ appropriate (a clear push against overly aggressive rate expectations). They further pushed back by noting the current implied rate path would see inflation would be below target in 3 years’ time, in other words saying they won’t hike as much, and confirms our estimates that policy reached peak hawkishness in February. The 100% odds of a 25bsp in May drifted to just above 80% on Friday, and markets will pay close attention to incoming BoE speak, where further push back against rates could be enough to see markets pricing out some of the >5 hikes still priced for 2022. As a result of the clear dovish tilt, we have adjusted our assessment of the bank’s policy stance to NEUTRAL. 2. Economic & Health Developments With inflation the main reason for the BoE’s recent rate hikes, there is a concern that the UK economy faces stagflation risk, as price pressures stay sticky while growth decelerates. That also means that current market expectations for rates continues to look way too aggressive even after the BoE’s recent push back. This means downside risks for GBP if growth data push lower and/or the BoE continue to push their recent dovish tone. 3. Political Developments Political uncertainty is usually GBP negative, so the fate of PM Johnson remains a focus. Fallout from the Sue Gray report was limited but as distrust grows the question remains whether a vote of no-confidence will happen (if so,short-term downside is likely). Focus will then be on whether the PM can survive a no-confidence vote (a win should be GBP positive and a loss GBP negative). The Northern Ireland protocol remains a focus with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp downside for GBP. 4. CFTC Analysis Recent CFTC data showed a mixed bag for GBP positioning as large specs and asset managers increased netshort positioning while leveraged funds increased shorts. For now, positioning doesn’t provide much in the way of a directional bias. However, price action has been stretched to the downside so be mindful of that.
by thunderpips
3
EURGBPLooking for this reverse head and shoulders pattern to succeed. Daily Candle rejecting a resistance from Feb 7th. Trade is based off sentiment that the European central bank is still reducing net asset purchases and will wait until December meeting to raise rates. Any adjustments to the key ECB interest rates will take place some time after the end of the Governing Council’s net purchases under the APP and will be gradual. Monthly net purchases under the APP will amount to €40 billion in April, €30 billion in May and €20 billion in June. -March 10th Monetary Policy Meeting (European Central Bank) At its meeting ending on 16 March 2022, the MPC voted by a majority of 8-1 to increase Bank Rate by 0.25 percentage points, to 0.75%. Given the current tightness of the labour market, continuing signs of robust domestic cost and price pressures, and the risk that those pressures will persist, the Committee judges that an increase in Bank Rate of 0.25 percentage points is warranted at this meeting. -March 17th Monetary Policy Meeting (Central Bank of England) sources: 1. www.ecb.europa.eu 2. www.bankofengland.co.uk
Short
by Redimere_91
EURGBP - FUNDAMENTAL AND TECHNICAL VIEW⛔️ EUR - There is a SPEAK of ECB PRESIDENT this week. CPI FLASH DATA will also be released. It is important for us to provide FOCUS for GBP. The EUR STRENGTH is determined by the DOLLAR STRENGTH and the MARKET SENTIMENT. There was also a very important story for GBP yesterday. But it could not make such an impact. ⛔️ EUR FEATURE currently stands at 1.1023 LEVEL. It rests on DYNAMIC S / R LEVELS. Also the GBP FEATURE stays at 1.3093 LEVEL. The EURGBP PRICE is priced above the DYNAMIC S / R LEVELS. Therefore, the PRICE can be slightly UP in the form of a STRUCTURE. Before that a RETRACEMENT can come to DYNAMIC S / R LEVELS. ⛔️ Currently the OVERALL MARKET is in a RISK OFF condition. But in the future most likely the MARKET RISK will be ON at the LONDON SESSION. ⛔️ EURGBP PRICE can PULLBACK and DOWN until it is slightly higher than DYNAMIC LEVELS. ⛔️ EURGBP PRICE can be UP to 0.8458 LEVEL before DOWN. Then it can be DOWN to 0.8303 LEVEL. The PRICE will move according to this week's ECONOMIC INDICATOR DATA and MARKET SENTIMENT.
by benny_marshall
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Accelerating policy normalization in deed, but just don’t call it that. The March ECB meeting saw the ECB surprise markets by speeding up their normalization pace with the APP set to increase to EUR 40bln in April and then lowered to EUR 30bln in May and EUR 20bln in June, with an aim of ending APP in Q3. This was quite a shift, and alongside 2024 HICP expected at 1.9% it meant a hike for 2022 is still on the table. However, even though the statement was hawkish, the ECB tried very hard to come across as dovish as possible, no doubt trying to get a soft landing. The bank broke the link between APP and rates by saying hikes could take place ‘some time’ after purchases end (previously said ‘shortly’ after they end). President Lagarde also stressed that the Ukraine/Russia war introduced a material risk to activity and inflation (and it’s too early to know what the full impact of this will be). As a result, she stresses more than once that their actions with the APP should not be seen as accelerating but rather as normalizing (pretty sure going from open-ended QE to done in the next quarter is accelerating but maybe owls play by the different rules). To further add dovishness Lagarde also said that the war in Ukraine means risks are now again titled to the downside, compared to ‘broadly balanced’. After the meeting STIR markets and bund yields jumped to price in close to 2 hikes by year-end again, but the dovish push back from Lagarde saw the EUR come under pressure, failing to benefit from higher implied rates. 2. Economic & Health Developments Recent activity data suggests the hit from lockdowns weren’t as bad as feared, but Omicron restrictions weighed on growth. Differentials still favour the US but interestingly has turned positive against the UK. The big focus is on the incoming data to offer further clues of possible stagflation, where the ECB could be forced to act on rates due to higher inflation but would negatively impact demand and growth as a result. There’s also focus on the fiscal side with ongoing discussions to potentially allow purchases of ‘green bonds’ NOT to count against budget deficits, and the possibility of major new debt issuance to finance energy purchases. If approved, this can drastically change the fiscal landscape and would be a positive for the EUR and EU equities. Geopolitics Even though the EUR, through Western sanctions, have dodged potential weakness from the CBR selling the EUR to prop up the RUB, the single currency was not immune for long. It held up okay initially, but as proximity risk to the war and economic risk from supply constraints and sanctions grew, the risk premium ballooned, sending EUR risk reversals sharply lower and implied volatility higher. With very big moves lower already, chasing the lows aren’t very attractive, but picking bottoms is equally dangerous without clear catalysts. 3. CFTC Analysis Some bullish sentiment signals from last week’s positioning changes with Large Specs increasing longs while leveraged funds decreased shorts. Still trading close to recent lows means speculative EUR longs versus the GBP and CAD looks interesting but doing so without catalysts at this stage is very risky. 4. The Week Ahead It’s inflation week for the Eurozone with Flash CPI data for March due on Friday. Given the rapid rise across commodities as a result of the war in Ukraine, there is a very high probability that prices see another big jump, especially at the headline level. The challenge with continued higher inflation is that it could start to add even more upside pressure to inflation expectations, which in turn could increase the risk of second-round effects in terms of wage increases. That means apart from the print itself, the focus will be on how the higher print feeds into inflation expectations, as that will have important implications for monetary policy. Focus will also remain on geopolitics commodities with questions of a whether the EU goes ahead with embargos on Russian Oil and Gas, further increasing stagflation risks. On this front, the fiscal side will also be important, where joint issuance of debt or country-specific fiscal relief measures to lessen higher price burdens will be important for the EUR. Both the GBP and EUR has carried the brunt of the geopolitical fallout in recent weeks due to the war’s proximity and the implications of sanctions, but with the EUR close to recent lows, any major positive breakthroughs will arguably have a bigger impact compared to negative ones (unless the negative news involves things like chemical attacks or heightened risk of the war spilling over into the rest of Europe). Thus, chasing the EUR lower on negative news does not look as attractive as trading it higher on good news. GBP FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy In March the BoE hiked rates by 25bsp as expected but delivered a bearish hike with BoE’s Cunliffe dissenting by voting to leave rates unchanged. This was a stark change from February where 4 members voted for a 50bsp hike. Cunliffe noted the negative impacts of higher commodity prices on real household incomes and economic activity as the main reason for his dissention, while remaining members thought a 25bsp hike was appropriate given the tight labour market and risks of second round effects. Even though inflation forecasts were upgraded to 8% in Q2 (previous 7.25%), the negative view that GDP was expected to slow to subdued rates showed growing concern of stagflation. The most bearish element of the statement was a change in language regarding incoming rates where the bank said they judge that some further modest tightening MIGHT be appropriate where previous guidance said more tightening was ‘LIKELY TO BE’ appropriate (a clear push against overly aggressive rate expectations). They further pushed back by noting the current implied rate path would see inflation would be below target in 3 years’ time, in other words saying they won’t hike as much, and confirms our estimates that policy reached peak hawkishness in February. The 100% odds of a 25bsp in May drifted to just above 80% on Friday, and markets will pay close attention to incoming BoE speak, where further push back against rates could be enough to see markets pricing out some of the >5 hikes still priced for 2022. As a result of the clear dovish tilt, we have adjusted our assessment of the bank’s policy stance to NEUTRAL. 2. Economic & Health Developments With inflation the main reason for the BoE’s recent rate hikes, there is a concern that the UK economy faces stagflation risk, as price pressures stay sticky while growth decelerates. That also means that current market expectations for rates continues to look way too aggressive even after the BoE’s recent push back. This means downside risks for GBP if growth data push lower and/or the BoE continue to push their recent dovish tone. 3. Political Developments Political uncertainty is usually GBP negative, so the fate of PM Johnson remains a focus. Fallout from the Sue Gray report was limited but as distrust grows the question remains whether a vote of no-confidence will happen (if so,short-term downside is likely). Focus will then be on whether the PM can survive a no-confidence vote (a win should be GBP positive and a loss GBP negative). The Northern Ireland protocol remains a focus with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp downside for GBP. 4. CFTC Analysis Recent CFTC data showed a mixed bag for GBP positioning as large specs and asset managers increased netshort positioning while leveraged funds increased shorts. For now, positioning doesn’t provide much in the way of a directional bias. However, price action has been stretched to the downside so be mindful of that. 5. The Week Ahead Economic data will be very light for the UK with no major data points on the schedule. We do have Governor Bailey schedule to speak on Monday which will of course be important for the current rate outlook for the UK (see our Monetary Policy section above). Last week’s economic data didn’t provide much in the way of momentum for Sterling, with price action at the index level finishing very close to where we started the week. Similarly, the spring budget didn’t provide much more compared to what was already expected, which means no real change to growth expectations in the UK and also means our med-term outlook remains neutral, leaning towards bearish (taking the BoE’s dovish tones into consideration). For the week ahead, there will of course be continued focus on geopolitics and commodity prices where any de-escalation in the form of a ceasefire should be positive for Sterling, and any additional escalations which also leads to further upside in commodity prices should be a negative as it further increases stagflation risks and puts further pressure on consumer incomes (which after Friday’s Retail Sales have shown that BoE’s Cunliffe was right to be concerned about how higher commodity prices will impact household incomes and economic activity.
by thunderpips
1
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Accelerating policy normalization in deed, but just don’t call it that. The March ECB meeting saw the ECB surprise markets by speeding up their normalization pace with the APP set to increase to EUR 40bln in April and then lowered to EUR 30bln in May and EUR 20bln in June, with an aim of ending APP in Q3. This was quite a shift, and alongside 2024 HICP expected at 1.9% it meant a hike for 2022 is still on the table. However, even though the statement was hawkish, the ECB tried very hard to come across as dovish as possible, no doubt trying to get a soft landing. The bank broke the link between APP and rates by saying hikes could take place ‘some time’ after purchases end (previously said ‘shortly’ after they end). President Lagarde also stressed that the Ukraine/Russia war introduced a material risk to activity and inflation (and it’s too early to know what the full impact of this will be). As a result, she stresses more than once that their actions with the APP should not be seen as accelerating but rather as normalizing (pretty sure going from open-ended QE to done in the next quarter is accelerating but maybe owls play by the different rules). To further add dovishness Lagarde also said that the war in Ukraine means risks are now again titled to the downside, compared to ‘broadly balanced’. After the meeting STIR markets and bund yields jumped to price in close to 2 hikes by year-end again, but the dovish push back from Lagarde saw the EUR come under pressure, failing to benefit from higher implied rates. 2. Economic & Health Developments Recent activity data suggests the hit from lockdowns weren’t as bad as feared, the Omicron restrictions weighed on growth. Differentials still favour the US and UK above the EZ. The big focus though is on the incoming inflation data after the ECB’s recent hawkish pivot at their Feb meeting. On the fiscal front, attention is on ongoing discussions to potentially allow purchases of ‘green bonds’ NOT to count against budget deficits. If approved, this can drastically change the fiscal landscape and would be a positive for the EUR and EU equities. 3. Geopolitics Even though the EUR, through Western sanctions, have dodged potential weakness from the CBR selling the EUR to prop up the RUB, the single currency was not immune for long. It held up okay initially, but as proximity risk to the war and economic risk from supply constraints and sanctions grew, the risk premium ballooned, sending EUR risk reversals sharply lower and implied volatility higher. With very big moves lower already, chasing the lows aren’t very attractive, but picking bottoms is equally dangerous without clear catalysts. 4. CFTC Analysis Large specs decreased longs (-40K) and leveraged funds (-19K) increased shorts, both exhibiting a strong bearish sentiment. But after the EUR’s strong bounce from recent lows, it seems additional shorts were added just at the wrong time. Regardless of positioning, trading the EUR with a clear catalyst is a must right now. GBP FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoE hiked rates by 25bsp as expected at their March meeting but delivered what was seen as a bearish hike as it was not a unanimous decision with BoE’s Cunliffe voting to leave rates unchanged. This was a very stark change from February where 4 members voted for a 50bsp hike. Cunliffe noted the negative impacts of higher commodity prices on real household incomes and economic activity as the main reason for his dissention, while the remaining members thought a 25bsp hike was appropriate given the tight labour market and risks of second round effects. Even though inflation forecasts were upgraded to 8% in Q2 (previous 7.25%), the negative view that GDP was expected to slow to subdued rates once again showed growing concern of stagflation risks. For us, the most bearish element of the statement was a change in language regarding incoming rates where the bank said they judge that some further modest tightening MIGHT be appropriate where previous guidance said more tightening was ‘likely to be’ appropriate, which was a very clear push back against the overly aggressive rate path that has been priced in for the bank. The bank further pushed back by noting that the current rate path implied by markets would mean inflation would be below their target in three years’ time, in other words saying they won’t hike as much, and confirms our estimates that policy reached peak hawkishness in February. The 100% odds of a 25bsp for May has drifted to just above 80% on Friday, and markets will pay very close attention to incoming BoE speak, where a further push back against higher rates could be enough to see markets pricing out some of the 4 hikes still priced for the rest of the year. 2. Economic & Health Developments With inflation the main reason for the BoE’s recent rate hikes, there is a concern that the UK economy faces stagflation risk, as price pressures stay sticky while growth decelerates. That also means that current market expectations for rates continues to look way too aggressive even after the BoE’s recent push back. This means downside risks for GBP if growth data push lower and/or the BoE continue to push their recent dovish tone. 3. Political Developments Political uncertainty is usually GBP negative, so the fate of PM Johnson remains a focus. Fallout from the Sue Gray report was limited but as distrust grows the question remains whether a vote of no-confidence will happen (if so,short-term downside is likely). Focus will then be on whether the PM can survive a no-confidence vote (a win should be GBP positive and a loss GBP negative). The Northern Ireland protocol remains a focus with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp downside for GBP. 4. CFTC Analysis Recent CFTC data showed GBP positioning continues to deteriorate across market participants with net-short increases for large specs and net-long reductions for leveraged funds. After the more dovish than expected BoE last week (and since it took place Thursday) incoming CFTC data should see this trend continue.
by thunderpips
5
EURGBP Potential drop | 25th Mar 2022In line with the Ichimoku indicator, we have a bearish bias that price will drop from our entry at 0.83575 in line with the 38.20% Fibonacci retracement towards our take profit at 0.82976 in line with the latest pull back support. Alternatively, if prices were to break out, price may potential rise towards our stop loss at 0.83766 which is in line with the 50.00% Fibonacci retracement. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Short
by Rockqet
EURGBP Potential drop | 24th Mar 2022With price moving below the ichimoku cloud, we have a bearish bias that price will from our entry at 0.83579 in line pullback resistance and 38.2% Fibonacci retracement towards our take profit at 0.82997 in line with the horizontal swing low support. Alternatively, price may break entry structure and head for our stop loss at 0.83964 in line with the 61.85 Fibonacci retracement level and horizontal swing high resistance. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Short
by Rockqet
EURGBP Potential drop|23rd Mar 2022 price is approaching our pivot where the ichimoku resistance, the horizontal overlap support and 23.6% Fibonacci retrecement level is at 0.83342. We have a bias that price will drop to take profit at 0.83582 in line with the pullback resistance. Alternatively, price may break entry structure and head for 1st support at 0.82127 in line with the swing low support. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Short
by Rockqet
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Accelerating policy normalization in deed, but just don’t call it that. The March ECB meeting saw the ECB surprise markets by speeding up their normalization pace with the APP set to increase to EUR 40bln in April and then lowered to EUR 30bln in May and EUR 20bln in June, with an aim of ending APP in Q3. This was quite a shift, and alongside 2024 HICP expected at 1.9% it meant a hike for 2022 is still on the table. However, even though the statement was hawkish, the ECB tried very hard to come across as dovish as possible, no doubt trying to get a soft landing. The bank broke the link between APP and rates by saying hikes could take place ‘some time’ after purchases end (previously said ‘shortly’ after they end). President Lagarde also stressed that the Ukraine/Russia war introduced a material risk to activity and inflation (and it’s too early to know what the full impact of this will be). As a result, she stresses more than once that their actions with the APP should not be seen as accelerating but rather as normalizing (pretty sure going from open-ended QE to done in the next quarter is accelerating but maybe owls play by the different rules). To further add dovishness Lagarde also said that the war in Ukraine means risks are now again titled to the downside, compared to ‘broadly balanced’. After the meeting STIR markets and bund yields jumped to price in close to 2 hikes by year-end again, but the dovish push back from Lagarde saw the EUR come under pressure, failing to benefit from higher implied rates. 2. Economic & Health Developments Recent activity data suggests the hit from lockdowns weren’t as bad as feared, the Omicron restrictions weighed on growth. Differentials still favour the US and UK above the EZ. The big focus though is on the incoming inflation data after the ECB’s recent hawkish pivot at their Feb meeting. On the fiscal front, attention is on ongoing discussions to potentially allow purchases of ‘green bonds’ NOT to count against budget deficits. If approved, this can drastically change the fiscal landscape and would be a positive for the EUR and EU equities. 3. Geopolitics Even though the EUR, through Western sanctions, have dodged potential weakness from the CBR selling the EUR to prop up the RUB, the single currency was not immune for long. It held up okay initially, but as proximity risk to the war and economic risk from supply constraints and sanctions grew, the risk premium ballooned, sending EUR risk reversals sharply lower and implied volatility higher. With very big moves lower already, chasing the lows aren’t very attractive, but picking bottoms is equally dangerous without clear catalysts. 4. CFTC Analysis Large specs decreased longs (-40K) and leveraged funds (-19K) increased shorts, both exhibiting a strong bearish sentiment. But after the EUR’s strong bounce from recent lows, it seems additional shorts were added just at the wrong time. Regardless of positioning, trading the EUR with a clear catalyst is a must right now. 5. The Week Ahead Very quiet week ahead for the EUR with the only economic data highlights being the flash PMI numbers for France, Germany and the EU composite measure. The PMI numbers will provide markets with a timely estimate for how recent geopolitical stresses have affected the mood among businesses. Remember that PMIs are diffusion indexes based on the subjective inputs from purchasing managers. It’s basically asking businesses whether they think the outlook is better or worse than it was the previous month and given the war in Ukraine we should not be surprised by a bigger than expected miss. That also means that if PMIs don’t slow down materially, it could ease some of the growing stagflation fears among market participants. Additionally, markets will also be eyeing commodity prices and geopolitical developments. Given the proximity of the war as well as the impact from sanctions, the EUR and GBP has carried the brunt of the geopolitical fallout in the FX space. Thus, given that the EUR is still very close to recent lows, any major positive breakthroughs will arguably have a bigger impact compared to negative ones (unless the negative news involves things like chemical attacks or heightened risk of the war spilling over into the rest of Europe). GBP FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoE hiked rates by 25bsp as expected at their March meeting but delivered what was seen as a bearish hike as it was not a unanimous decision with BoE’s Cunliffe voting to leave rates unchanged. This was a very stark change from February where 4 members voted for a 50bsp hike. Cunliffe noted the negative impacts of higher commodity prices on real household incomes and economic activity as the main reason for his dissention, while the remaining members thought a 25bsp hike was appropriate given the tight labour market and risks of second round effects. Even though inflation forecasts were upgraded to 8% in Q2 (previous 7.25%), the negative view that GDP was expected to slow to subdued rates once again showed growing concern of stagflation risks. For us, the most bearish element of the statement was a change in language regarding incoming rates where the bank said they judge that some further modest tightening MIGHT be appropriate where previous guidance said more tightening was ‘likely to be’ appropriate, which was a very clear push back against the overly aggressive rate path that has been priced in for the bank. The bank further pushed back by noting that the current rate path implied by markets would mean inflation would be below their target in three years’ time, in other words saying they won’t hike as much, and confirms our estimates that policy reached peak hawkishness in February. The 100% odds of a 25bsp for May has drifted to just above 80% on Friday, and markets will pay very close attention to incoming BoE speak, where a further push back against higher rates could be enough to see markets pricing out some of the 4 hikes still priced for the rest of the year. 2. Economic & Health Developments With inflation the main reason for the BoE’s recent rate hikes, there is a concern that the UK economy faces stagflation risk, as price pressures stay sticky while growth decelerates. That also means that current market expectations for rates continues to look way too aggressive even after the BoE’s recent push back. This means downside risks for GBP if growth data push lower and/or the BoE continue to push their recent dovish tone. 3. Political Developments Political uncertainty is usually GBP negative, so the fate of PM Johnson remains a focus. Fallout from the Sue Gray report was limited but as distrust grows the question remains whether a vote of no-confidence will happen (if so,short-term downside is likely). Focus will then be on whether the PM can survive a no-confidence vote (a win should be GBP positive and a loss GBP negative). The Northern Ireland protocol remains a focus with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp downside for GBP. 4. CFTC Analysis Recent CFTC data showed GBP positioning continues to deteriorate across market participants with net-short increases for large specs and net-long reductions for leveraged funds. After the more dovish than expected BoE last week (and since it took place Thursday) incoming CFTC data should see this trend continue. 5. The Week Ahead In the week ahead the main focus for Sterling will be incoming PMI data, the UK annual budget release and geopolitics. On the data side, with stagflation risks continuing to grow, markets will be keenly watching the PMI data to see how fast growth sentiment has deteriorated after recent geopolitical tensions. Keep in mind that the BoE has been concerned about the slowing growth environment from before the war, and a bigger than expected drop could add to those fears. Remember that PMIs are diffusion indexes based on the subjective inputs from purchasing managers. It’s basically asking businesses whether they think the outlook is better or worse than it was the previous month and given the war in Ukraine we should not be surprised by a bigger than expected miss. On the geopolitical front any key developments will be especially important for the GBP and EUR given their proximity and the impact of sanctions. On the budget side, markets will want to see whether Chancellor Sunak is able to ease some of the growth concerns by alleviating some of the pressure on consumers where real incomes have been a concern given rising food and energy prices. Given the one-side downside in Sterling recently, the GBP will arguably be more sensitive to positive news compare to negative.
by thunderpips
4
EURGBP Potential bullish bounce | 22nd Mar 2022price is approaching our pivot where the ichimoku support, the horizontal overlap support and 50% Fibonacci retrecement level is at 0.83297. We have a bias that price will rise to our resistance at 0.84515 in line with the swing high resistance. Alternatively, price may break pivot structure and head for 1st support at 0.83249 in line with the swing low support. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
Long
by Rockqet
1
EURGBP approaching the long-term sell entryThe EURGBP pair has been trading within a Channel Down since mid April 2021, practically a while year almost. As this 1D chart shows, the indicator that helps the most at identifying buy and sell entries is the RSI, which has a clear Resistance Zone (to open a price sell) and a Support Zone (to open a buy). Right now the RSI is near the Resistance Zone while the price is near the Lower Highs trend-line (top) of the Channel Down. A rejection there will coincide with a rejection on the 1D MA200 (orange trend-line) and a Double Top on the 0.84785. The last such Double Top was seen on December 09 2021, where EURGBP got rejected and started a new sell sequence that made a Lower Low exactly on the -0.382 Fibonacci extension. Currently the new such extension is at 0.81000. On the other hand, if the 1W MA50 (red trend-line) breaks to the upside (has been intact since January 13 2021), the trend shifts to bullish long-term and should technically start filling the Fibonacci extensions to the upside (1.382 to 2.0), which as you see happen to be almost exactly where previous Lower Highs of the Channel Down were. -------------------------------------------------------------------------------------------------------- Please like, subscribe and share your ideas and charts with the community! --------------------------------------------------------------------------------------------------------
Short
by TradingShot
1
EURGBP looking up 🦐EURGBP on the 4h chart after the recent low sharply inverted the trend and started a strong impulse to the upside. I can see the price testing twice the daily resistance at the 0.84200 before retracing at the 0.5 Fibonacci level and coming back for a new test and a potential break. How can we approach this scenario? I will monitor the market to check a possible break above the 0.84250 area. In that case i will look for a potential entry according to the Plancton's strategy rules. ––––– Follow the Shrimp 🦐 Keep in mind. 🟣 Purple structure -> Monthly structure. 🔴 Red structure -> Weekly structure. 🔵 Blue structure -> Daily structure. 🟡 Yellow structure -> 4h structure. ⚫️ Black structure -> <4h structure. Here is the Plancton0618 technical analysis , please comment below if you have any question. The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger.
Long
by InkyGrip
10
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Accelerating policy normalization in deed, but just don’t call it that. The March ECB meeting saw the ECB surprise markets by speeding up their normalization pace with the APP set to increase to EUR 40bln in April and then lowered to EUR 30bln in May and EUR 20bln in June, with an aim of ending APP in Q3. This was quite a shift, and alongside 2024 HICP expected at 1.9% it meant a hike for 2022 is still on the table. However, even though the statement was hawkish, the ECB tried very hard to come across as dovish as possible, no doubt trying to get a soft landing. The bank broke the link between APP and rates by saying hikes could take place ‘some time’ after purchases end (previously said ‘shortly’ after they end). President Lagarde also stressed that the Ukraine/Russia war introduced a material risk to activity and inflation (and it’s too early to know what the full impact of this will be). As a result, she stresses more than once that their actions with the APP should not be seen as accelerating but rather as normalizing (pretty sure going from open-ended QE to done in the next quarter is accelerating but maybe owls play by the different rules). To further add dovishness Lagarde also said that the war in Ukraine means risks are now again titled to the downside, compared to ‘broadly balanced’. After the meeting STIR markets and bund yields jumped to price in close to 2 hikes by year-end again, but the dovish push back from Lagarde saw the EUR come under pressure, failing to benefit from higher implied rates. 2. Economic & Health Developments Recent activity data suggests the hit from lockdowns weren’t as bad as feared, the Omicron restrictions weighed on growth. Differentials still favour the US and UK above the EZ. The big focus though is on the incoming inflation data after the ECB’s recent hawkish pivot at their Feb meeting. On the fiscal front, attention is on ongoing discussions to potentially allow purchases of ‘green bonds’ NOT to count against budget deficits. If approved, this can drastically change the fiscal landscape and would be a positive for the EUR and EU equities. Geopolitics Even though the EUR, through Western sanctions, have dodged potential weakness from the CBR selling the EUR to prop up the RUB, the single currency was not immune for long. It held up okay initially, but as proximity risk to the war and economic risk from supply constraints and sanctions grew, the risk premium ballooned, sending EUR risk reversals sharply lower and implied volatility higher. With very big moves lower already, chasing the lows aren’t very attractive, but picking bottoms is equally dangerous without clear catalysts. 3. CFTC Analysis Friday’s CFTC data did not show what we expected. Despite the big falls in the EUR and a very big reduction in Asset Manager net-longs, leverage funds reduced net-shorts on the EUR. Unless they reduced shorts in anticipation of a bounced from stretched lows the update does not make much sense right now. Regardless of positioning though, the best way to trade the EUR from these levels is with a clear catalyst. 4. The Week Ahead For the week ahead it’ll be very quiet on the data front, with all the focus for the EUR still on the geopolitical situation, where any escalation in tensions is expected to weigh on the EUR while de-escalations are expected to provide support. Apart from that, given the liquidity of the EURUSD and EURGBP currency pairs, as well as the EUR’s close to 60% weighting in the DXY , the upcoming FOMC and BoE policy decisions could end up being the biggest drivers for the EUR apart from geopolitics. The hurdle is quite high for the Fed to really surprise markets on the hawkish side (certainly possible for them to do so though), which means unless markets price in even more hikes for the Fed and unless the geopolitical situation deteriorates very drastically, the strong USD upside might run out of short-term steam which would be supportive for the EUR. When it comes to the BoE though, the recent amount of downside priced in for the GBP in such a short space of time and the recent dovish tones from the bank, means the bar is very low for a less dovish reaction from the GBP. Why is this important for the EUR? Given the liquidity of the EURGBP pair any major momentum in EURGBP can affect the EUR and GBP pairs in general so worth keeping on the radar. GBP FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Hawkish surprise with a hint of dovish undertones sums up the Feb BoE decision. The bank announced the start of passive QT and hiked rates by 25bsp as expected, but the vote split was unanimous (9-0) but with a big hawkish surprise being 4 MPC members voting for a 50bsp hike. Inflation forecasts saw a big upward revision to a 7.25% peak by April ( prev . 6.0%) & 5.21% in 1-year ( prev . 3.40%). This initial hawkish statement saw immediate strength for GBP but during the press conference the BoE tried their best to get a dovish landing. Gov Bailey started his opening remarks by noting that the MPC’s decision to hike was not because the economy was strong but only because higher rates were necessary to return inflation to target, and even though he opened the door for further hikes he added that markets should not assume rates are on a long march higher. He also acknowledged the stagflation fears recently voiced by some market participants by saying that policy faces a trade-off between weakening growth and higher inflation . Despite the dovish nuances, STIR markets still price an implied cash rate of 1.0% by May which would mean a 25bsp in both March and May (1.0% is the level the BoE previously said they would being outright Gilt selling). Overall, the statement was hawkish, but the clear dovish undertones from the BoE was a bit surprising and also a bit worrisome for the future outlook. 2. Economic & Health Developments With inflation the main reason for the BoE’s recent rate hikes, there is a concern that the UK economy faces stagflation risk, as price pressures stay sticky while growth decelerates. That also means that current market expectations for rates looks way too aggressive and means downside risks for GBP should growth data push lower, inflation stay sticky, or the BoE continue to push their recent dovish tone. 3. Political Developments Domestic political uncertainty usually leads to higher risk premiumsfor GBP, so the fate of PM Johnson remains a focus. Fallout from the heavily redacted Sue Gray report was limited but with growing distrust from within his party the question remains whether a vote of no-confidence will happen (if so, that could see short-term downside), and then focus will be on whether the PM can survive an actual vote of no-confidence, where a win should be GBP positive and negative for GBP if he loses. The Northern Ireland protocol is still in focus with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp downside for GBP. 4. CFTC Analysis Friday’s most recent CFTC data showed GBP positioning deteriorated across market participants with big netshort increases for large specs and asset managers, while leveraged funds were more reserved in their reduction of their Sterling net-long (biggest amongst the majors). Who needs to capitulate among these? Given how stretched the recent downside has been, leveraged funds might be better positioned going into the BoE. 5. The Week Ahead For the week ahead the data focus will fall on the incoming labour report, with more focus on the wage component as opposed to the headline jobs print. The bank is concerned about second-round effects, so much so that Governor Bailey has in previous weeks said that workers should not demand exuberant increases. We also saw from the Bank’s Agents report suggesting there are signs of significant wage increases this year. Thus, goes without saying that wages will be important. Even though higher wages could see short-term GBP upside, what it means med-term is arguably more negative as it adds to further stagflation fears. For the BoE meeting, markets are fully pricing in a 25bsp hike which means all the focus will fall on the tone and language. The bank’s commitment to lower inflation will be in focus, especially as it relates to growth. Recall that at the Feb policy press conference and the MPC hearing, the bank was already concerned about what higher inflation and higher rates would mean for the growth outlook. That has now arguably been exacerbated by the Ukraine/Russia war. The one risk to the meeting is from the hawkish side, where the GBP’s drop is something, they would have noticed. As lower currency valuation feeds into higher inflation , they could sound less dovish, but at this stage that would seem like an unproductive way of easing inflationary pressures (but not something to completely reject as an option). Our baseline is for a continued dovish tone, but unless they come across even more dovish than before, the recent stretched downside in the GBP could offer some short-term relief higher.
by thunderpips
EURGBP looking up? 🦐EURGBP on the daily chart after the perfect test of the monthly support sharply inverted the trend and is now breaking the descending trendline. I can see the price testing the daily resistance and possibly breaking above. How can we approach this scenario? Being Friday might be risky to open a position in the US session but i will monitor the market to check a possible break above the 0.84250 area. In that case i will move on the 4h timeframe to check for a potential entry according to the Plancton's strategy rules. ––––– Follow the Shrimp 🦐 Keep in mind. 🟣 Purple structure -> Monthly structure. 🔴 Red structure -> Weekly structure. 🔵 Blue structure -> Daily structure. 🟡 Yellow structure -> 4h structure. ⚫️ Black structure -> <4h structure. Here is the Plancton0618 technical analysis , please comment below if you have any question. The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger.
Long
by InkyGrip
2
EUR GBP - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Hawkish sums up the ECB’s Feb decision. The initial statement was in line with Dec guidance and offered very little surprises (which was initially seen as dovish). However, during the press conference President Lagarde explained that the upside surprises in CPI in Dec and Jan saw unanimous concern around the GC in the nearterm and surprised markets by not repeating Dec language which said a 2022 rate hike was unlikely (which immediately saw STIR markets price in a 10bsp hike as soon as June). The president also made the March meeting live, by stating that they’ll use the March meeting to decide what the APP will look like for the rest of 2022 (which markets took as a signal that the APP could conclude somewhere in 2H22. After the meeting we had the customary sources comments which stated that the ECB is preparing for a potential policy recalibration in March (with some members wanting to change policy at today’s meeting already) and added that it is sensible not to exclude a 2022 hike as a possibility and also stated that the ECB is considering possibly ending the APP at the end of Q3 (which would put a Q4 hike in play). Furthermore, sources stated that if inflation does not ease, they’ll consider adjusting policy in March (which means incoming inflation data will be critical). The shift is stance and tone were significant for us to change the bank’s overall policy stance to neutral and to adjust the EUR’s fundamental bias from dovish to neutral as well. Incoming inflation data will be key from here. 2. Economic & Health Developments Recent activity data suggests the hit from lockdowns weren’t as bad as feared, the Omicron restrictions weighed on growth. Differentials still favour the US and UK above the EZ. The big focus though is on the incoming inflation data after the ECB’s recent hawkish pivot at their Feb meeting. On the fiscal front, attention is on ongoing discussions to potentially allow purchases of ‘green bonds’ NOT to count against budget deficits. If approved, this can drastically change the fiscal landscape and would be a positive for the EUR and EU equities. 3. Geopolitics Even though the EUR, through Western sanctions, have dodged potential weakness from the CBR selling the EUR to prop up the RUB, the single currency was not immune for long. It held up okay on Monday and Tuesday, but as proximity risk to the war and economic risk as a result of sanctions grew, the risk premium ballooned, sending EUR risk reversals tanking lower while implied volatility jolted higher. With very big moves lower already, chasing the lows aren’t very attractive, but picking bottoms is equally dangerous. 4. CFTC Analysis Last week we looked at the big amount of bullish sentiment built up for the EUR over the past 3 months, and we think a lot of those new bulls were caught with their pants down the past week, forcing huge capitulations as the EUR went into free fall across the board. Keep in mind the release date of the COT data means this week’s release won’t show the extent of unwinding until next week, so flying blind is an understatement here. 5. The Week Ahead The ECB will be the main scheduled risk event for the EUR this week, alongside further unscheduled war news of course. For the ECB, there is not a lot of conviction that the bank will announce a policy recalibration at this week’s meeting. Even though the latest HICP saw yet another bigger-than-expected jolt higher, the geopolitical situation adds a lot of risk. With three separate ECB members (Stournaras, Centeno, Rehn) specifically mentioning stagflation as a growing risk, that shows us that the focus has shifted for some. However, the bank will have a really tough time this week as they will need to juggle between trying to downplay tightening financial conditions in the midst of a potentially big hit to the economy, while also trying to convince markets that they will sort out the current inflation challenge (with ECB’s Lane saying staff economic projections were revised in order to take the Russian invasion into account). On the Russia/Ukraine side, the market priced in a ton of risk premium last week, with EUR risk reversals falling off a cliff and reaching levels last seen during the Covid crash in 2020 and the EU sovereign debt crisis in 2012. With so much bad news priced in the EUR might struggle to continue its move lower without really substantial bad news, but at the same time with the big risk premium any good news could see exacerbated upside. GBP FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy Hawkish surprise with a hint of dovish undertones sums up the Feb BoE decision. The bank announced the start of passive QT and hiked rates by 25bsp as expected, but the vote split was unanimous (9-0) but with a big hawkish surprise being 4 MPC members voting for a 50bsp hike. Inflation forecasts saw a big upward revision to a 7.25% peak by April ( prev . 6.0%) & 5.21% in 1-year ( prev . 3.40%). This initial hawkish statement saw immediate strength for GBP but during the press conference the BoE tried their best to get a dovish landing. Gov Bailey started his opening remarks by noting that the MPC’s decision to hike was not because the economy was strong but only because higher rates were necessary to return inflation to target, and even though he opened the door for further hikes he added that markets should not assume rates are on a long march higher. He also acknowledged the stagflation fears recently voiced by some market participants by saying that policy faces a trade-off between weakening growth and higher inflation . Despite the dovish nuances, STIR markets still price an implied cash rate of 1.0% by May which would mean a 25bsp in both March and May (1.0% is the level the BoE previously said they would being outright Gilt selling). Overall, the statement was hawkish, but the clear dovish undertones from the BoE was a bit surprising and also a bit worrisome for the future outlook. 2. Economic & Health Developments With inflation the main reason for the BoE’s recent rate hikes, there is a concern that the UK economy faces stagflation risk, as price pressures stay sticky while growth decelerates. That also means that current market expectations for rates looks way too aggressive and means downside risks for GBP should growth data push lower, inflation stay sticky, or the BoE continue to push their recent dovish tone. 3. Political Developments Domestic political uncertainty usually leads to higher risk premiumsfor GBP, so the fate of PM Johnson remains a focus. Fallout from the heavily redacted Sue Gray report was limited but with growing distrust from within his party the question remains whether a vote of no-confidence will happen (if so, that could see short-term downside), and then focus will be on whether the PM can survive an actual vote of no-confidence, where a win should be GBP positive and negative for GBP if he loses. The Northern Ireland protocol is still in focus with the UK threatening to trigger Article 16 and the EU threatening to terminate the Brexit deal if they do. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp downside for GBP. 4. CFTC Analysis Even though recent data started to look more constructive for Sterling from a sentiment point of view, the CFTC data remains a mix bag with no clear consensus view, and nothing really stretched by any means. Interestingly, it seems like Leveraged Funds chose the worse time to move GBP into the biggest net long as the currency took a really big knock last week alongside the EUR. 5. The Week Ahead It’s a very light week on the data front for Sterling with no major data points to watch out for. That means that the biggest focus for the Pound will fall to the ongoing geopolitical uncertainty. Given their proximity to the actual war front, as well as the direct impact of sanctions on their economies, the EUR and GBP saw some very sizeable downside last week. Comparing implied volatility across the G10, the moves higher in the EUR and GBP were worrisome spikes as risk premiums continued to build. This has added another layer of risk on to Sterling, with the BoE’s recent dovish tone already causing some downside risk before the geopolitical risks came into focus. As always, we need to keep price action in mind, and with the amount of downside priced into currencies like the GBP and EUR in such a short space of time, we do want to be mindful of some mean reversion at some stage.
by thunderpips
2