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Today’s Notable Sentiment ShiftsGBP – Sterling edged up on Wednesday, hitting a 23-month high against EUR after higher-than-expected inflation data added to pressure on the Bank of England to raise interest rates next month. Commenting on GBP price action and its outlook. Bank of America notes that “an awful lot is priced for the BoE cycle – yet we think it is too early to ‘fade’ the GBP rally on a fully-priced BoE cycle – just in the same way it is too early to fade the dollar rally.” CAD – The Canadian dollar edged higher on Wednesday as oil prices rose and CPI data showed a 30-year high for inflation, supporting the growing argument for the BoC to hike interest rates as soon as next week. Commenting on the report, one of TD Securities chief analysts noted that “the increase in the core metrics does catch my eye… This probably does incrementally ratchet up pressure on the BoC to start lifting rates sooner than later.”
by thunderpips
3
Today’s Notable Sentiment ShiftsGBP – Sterling fell to its lowest level in a week on Tuesday as speculation about the fate of Boris Johnson’s premiership weighed on the heavily bought currency. Although it’s unclear exactly how much of an impact UK political uncertainty could have, CIBC explains that “the first reaction from investors from outside the local market is ‘sell first and ask questions later’.” CAD – The Canadian dollar has remained well supported by ongoing strength in oil prices, as WTI climbed to its highest level since 2014 and as investors bet that the Bank of Canada would raise interest rates as soon as next week.
by thunderpips
3
GBP/USD Sell Opportunity The pound has been dropping since June 2021. In the last six months, the pound has not been able to break the trendline resistance and support the trendline. Currently, the GBP/USD is hovering close to trendline resistance. More than 450+ pips have risen from trendline support in the last 20 days. That's why I am expecting that market may have some corrections. We should not sell if only the market stays at the resistance level. We can keep in sell mode from the resistance level only when the market creates a bearish pattern. We will enter a sell position only when the GBP/USD creates a bearish pattern from the trend line resistance. If the GBP/USD closes below the current level of 1.3472, we can think of the sell position as well. Because breaking below the 1.3472 will confirm immediate support trendline breakout, or if we see the pound tested 1.3610 / 20 rate, we can also execute our sell order with 80/100 pips stops.
Short
by Gold_Trading_Expert
2
GBP JPY - FUNDAMENTAL DRIVERSGBP FUNDAMENTAL BIAS: WEAK BULLISH Monetary Policy They did it again! After leading markets to believe that a Dec rate hike was looking unlikely the bank surprised by announcing a 15bsp rate hike. Recall we had external member Saunders (who voted for a hike in Nov) suggested there could be benefits in waiting before moving on rates until some of the uncertainty from Omicron dissipates. We also had BoE’s Mann a few days before the meeting saying it was premature to talk about hikes but ended up voting for a hike with an 8-1 vote split and BoE’s Tenreyro the only dissenter. The bank lost a lot of the credibility that it had left, but in the end, they did the right thing (in my opinion at least) to stay data dependent and hike given the recent flurry of much better-thanexpected econ data. The consensus view was that current price pressures warranted tighter policy in the near-term, with inflation expected to peak close to 6% in April (up from previous projections). One negative was of course growth which is expected to push lower given the Omicron variant and associated restrictions. For now, the bank’s move is a hawkish development for the GBP, with Omicron and incoming data key considerations for the rate outlook going forward (a 25bsp hike is fully priced for March). Economic & Health Developments Even though activity data has been slowing, the economy is not expected to fall off a cliff by any means. Growth expectations for 2022 still places the UK in front of the G7 which means growth differentials are still favourable for the GBP. It seems like the solid economic data (beats for CPI, Jobs, Retail Sales) were enough to convince the BoE to hike, and as long as the data remains firm it should keep the odds of additional tightening on the table. Focus now turns to Omicron to see how it impacts incoming data and affects the rate outlook going into 2022. 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. Furthermore, political uncertainty surrounding PM Johnson and the lack of trust from his own party opens up another can of worms for Sterling (the currency usually doesn’t perform well when the future of a PM is brought into doubt), and that remains a driver to watch in the sessions ahead. CFTC Analysis Latest CFTC data showed a positioning change of +11548 with a net non-commercial position of -39171. It seems like both price action and positioning has caught up with the BoE’s hike in December with Sterling putting in a decent week of gains and positioning also seeing a sizeable reduction in net-shorts. The Week Ahead In the week ahead it’s quiet on the data front for the UK once again with GDP the only real data point of concern but we are not expecting much from it. Arguably one of the bigger drivers for the GBP will be what happens to overall risk sentiment as well as the USD. As a currency with a slightly higher beta, the Pound can be sensitive to overall risk sentiment so keeping track of how equities markets are doing will be important. Furthermore, even though we maintain a bullish view on Sterling, the recent run higher has been rather one-sided, and we are inching closer towards some very key technical resistance levels around 1.3600. One possible trigger that could see GBPUSD break through that though is Wednesday’s US CPI. After the push lower on Friday, the DXY broke through key support, and a big miss in CPI which means less need for very aggressive Fed policy is not a good look for the USD. JPY FUNDAMENTAL BIAS: BEARISH 1. Monetary Policy At their Dec meeting the BoJ kept policy mostly unchanged apart from unanimously voting to scale back emergency pandemic relief funding from March which includes tapering corporate bond and commercial paper buying, but they did also vote to extend a portion of the pandemic relief loan scheme to March for smaller firms. As always, the BoJ said they are ready to add additional stimulus and easing steps as the economy needs it. The bank reiterated that even though the economy has picked up it does still remain in a severe situation due to the COVID-19. The bank remains dovish and is unlikely going to change anytime soon. 2. 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 for the JPY; and although monetary policy expectations can still prove marketmoving 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 ongoing monetary and fiscal policy support paved the way for markets to expect a robust global economic recovery. As the Fed and other banks start to normalize, we do need to remember that it means those fiscal and monetary policy support is being reduced, which could mean a lot more volatility for markets in the weeks and months ahead. Even though that doesn’t mean our med-term bias for the JPY has changed, it simply means that we should expect more risk sentiment ebbs and flows this year, and the heightened volatility can create some fantastic directional moves in the JPY, as long as yields play their part. 3. Low-yielding currency with inverse correlation to US10Y As a low yielding currency, the JPY usually shares a strong inverse correlation to 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 isn’t perfect and will ebb and flow depending on the type of market environment from both a risk and cycle point of view. With the Fed tilting more aggressive, we think that opens up more room for curve flattening to take place with US02Y likely pushing higher while US10Y underperform. In this environment we do see some mild upside risks for the JPY, but we should not look at the influence from yields in isolation and also weigh it up alongside underlying risk sentiment and price action in the USD of course. 4. CFTC Analysis Latest CFTC data showed a positioning change of -9160 with a net non-commercial position of -62262. Even though the JPY’s med-term outlook remains bearish , the big net-shorts for both large speculators and leveraged funds always increases the odds of more punchy safe haven flows and mean reversion when risk sentiment deteriorates. However, despite risk sentiment taking a hit in the past trading week, the JPY has remained pressured as the move in US yields kept any JPY rallies in check. 5. The Week Ahead In the week ahead the biggest focus for the JPY will be on overall risk sentiment with the big rally in risk sentiment going into the last few trading days of the year with S&P futures managing to squeeze out another all-time high and Nasdaq futures getting very close to doing the same. The big amount of upside has been mostly attributed to equities taking the path of least resistance ( med-term bias remains tilted higher) and moves was probably exacerbated by thinner liquidity and lower volumes. If that momentum can continue at the start of the new year, we can expect to see further downside for the safe haven JPY and will be a key focus for the currency for the week ahead. Apart from that, keeping an eye on US yields will be important as always.
by thunderpips
11
GBPJPY Short after two patternsHi All So GBPJPY after more than 600 pips up move with no fall of 60 pips. Now he is at a strong Bollinger Band resistance and Fibonacci resistance. At the small time frame you can see in the photo there are 2 patterns, the first break to the upside and get very nice support from the 2 trendlines that were touching each other on the same price, now because of the big time frame resistance, I expect that this uptrend line resistance will work and the price will drop to retest the support and even to break it to the downside. Also since 2010 was only 1 time (2019) that price by the first day of the year didn't go the opposite direction of the last day of the year, so on Friday (end of 2021) we end as a blue candle, so the first trading day of 2022 supposed to be red. Just showing my options .
Short
by StudyWallStreet
3
Today’s Notable Sentiment ShiftsSafe-havens – USD, CHF and JPY came under pressure on Wednesday as traders turned more positive about the global economic outlook, even as Omicron cases rocketed and investors braced for more volatility. Indeed, Brown Brother Harriman argue that “risk-off impulses continue to ebb. we are likely in a consolidative period for now given the lack of any major new drivers.” GBP – Sterling rose on Wednesday, despite official data showing Britain’s economy grew more slowly than previously thought in Q3 as participants found solace in reports that the UK government would not be announcing further coronavirus restrictions this side of Christmas.
by thunderpips
9
Today’s Notable Sentiment ShiftsGBP – A rebound in global risk appetite pushed the Britain pound up against the dollar and euro on Tuesday, after Britain announced support for businesses hit by the latest wave of COVID-19 infections amid fears of new restrictions on activity. Commenting on GBP’s recent performance and outlook, however, ING notes that “the fast spread of the Omicron variant in the UK may keep some pressure on GBP around Christmas, in particular as the government may opt to impose some new restrictions.” Although, adding that investors likely still have short positions on the pound, which could help limit its losses, but concluding that “risks still appear moderately skewed to the downside”.
by thunderpips
13