CCY Corner: #GBPUSD Divergence, Sentiments & Momentum

The near term weakness in the USD after softening reports on the US economy have finally given long remaining short-sellers on the Pound to cover positions. As Cable prices have started to recover from its lower levels, speculative sentiments contrary to price and volume have lagged behind when last week's volume slightly measured above its moving average volumes of transaction.

Speculative sentiments have fallen to negative territory while prices have recovered simply based from the Hawkish BoE minutes directing a favorable reaction for Cable prices to move to its current levels @1.5180 which also serves as the initial point of daily price resistance on the Asian session before another push higher can take place.

Meanwhile, a visible divergence have occurred when prices reached its lowest level @1.4565. Momentum and volumes relatively were lower and an unconvincing gradual buildup of prices from short-covering have supported the recent move on the Pound. Asian trading opening were mildly soft across the board and have remained within the day's range. However, a further increase in market would continue to prevail for Cable, as prices would still swing higher with some session pullbacks to come with it. For as long as the US Dollar would continue it's corrective move; the tech perspective on GBPUSD would be a continued V formation that would signify a positive tone moving forward, especially if no considerable change in direction with its corresponding EURGBP Cross rate would be made. This divergence would affect the EURUSD and the AUDUSD more effectedly as the US Dollar declines. 

Reference Trade in Effect

GBPUSD as of April 15, 2015 

GBPUSD_EURGBP DIVERGENT TREND

A Cipher3 Applied Analysis & a Combination of a Counter-trade Strategy 

USD, FX, Commodities & Equities

Update: USD GBP EURGBP: Insight

Staying the course on Effective Analysis: With a full round of news reports and data coming out for the week, we would maintain our current course and analysis of the market. Making certain that we would be adapting to any sudden change in market conditions favorable or not with our exposure in the market.

Strategies pertaining to the US Dollar has been confined within its HI/LO range which we have previously defined open to directional price movements in both directions. It has been in an up & down daily pattern on prices between the 81.02 High and the 80.05/10 first line of support since then. The USD has now outlived both major events with the ECB and the BoE, for now the FOMC would weigh in the market by this week. Of course, CPI on both the UK and US followed by the BoE minutes and the Swiss National bank rate decision on top of the NZD GDP figures would be added to the mix of the highlights and market volatility across the board. Click to continue 

Update:
SYMBOL                            CHG      % CHG

S&P 500           1,940.46     +12.58    +0.65%

DJI                 16,921.46    +14.84  +0.09%

DDM              121.04    +0.25   +0.21%

DIA                169.09    +0.16   +0.09%

FB                   64.341     -1.25   -1.92%

GOOG            554.90     +1.53   +0.28%

SBUX               77.23     +1.67   +2.21%

TWTR              38.90     +0.16   +0.41%

CABLE Declines After BOE..who's next?

Alternating Talking Points from the Top!

The overall on inflation good contrary to the statements made by the BOE Carney, that there is no rush to raise rates, as it all depends on the other results with the economy before such move would be made.

This is another form of verbal intervention / easing CABLE prices that drove the GBPUSD down to its original starting point of support @1.6745/50. And have stayed just slightly on top of its trend line recovery price @1.6775 as of this writing.Net percentage on trade positions between the GBPUSD, GBPJPY, AUDUSD and AUDJPY remains in positive territory as a main strategic CCY move. The closing prices amongst the majors and cross rates is vital to determine the near term price direction of the market.

After the BOE,,,who's next?

What is a 'Variable Ratio-Risk Analysis vs. Event Driven Risk Analysis for an investor?

First we do need to define what a'Variable Ratio-Risk Analysis (VRRA) mean to an investor. The VRRA as we termed it is the study of price changes similar to Price Action analysis, but goes deeper to the understanding of the statistical relationship among variables that make up the building blocks of the investors asset exposure.

The investor's portfolio either in Foreign exchange or related financial instruments that has in some form or another is influenced by global market conditions.in  prices. This also includes certain currency hedges that can be structured to control the total amount in currency holdings, stocks, treasuries, interest rates and other forms of instruments affecting the price fluctuation..

Please take note that there at least 5 Event Driven Risks for this week's trading activity.

VRA vs. EDR Analysis

GBP Reinforced Trend

Post UK Unemployment: GBP Rebounds 

With the UK Unemployment rate figure dropping to 7.1% as reported today alongside the BoE minutes on its monetary policy, the GBPUSD currency major jumping to as high as 1.6580 in the early morning sessions of the US market.

In the past statements made by the Bank of England is that it would only consider raising rates when the unemployment figure would decline to a 7% low. And this has been the threshold or may even be set as the BoE benchmark before any movement on rates would be made. However, traders were quick on the draw and helped push Cable to its recent highs.

And this price action may find support in the price momentum and a considerable follow through when volume build up and more likely a new set of forward rate guidance to anticipate that the BoE may start considering its move ahead of time.

GBP Reinforced Trend

Case Study: Effective Sequence of Trade maintaining the course

CCy Insight & Price Behavior: USDJPY

UPDATE 11.22: USDJPY Steadily supported with fundamentals with US economic data while GBPJPY cross rate supports both majors contrary to the USD daily price swings. Corrective moves have materized specially with Cable holding steady as it continues to move higher. An effective "Sequence of Trade - maintaining the course"

UPDATE 11.15: USDJPY finally breaks benchmark of 100 way above trendline resistance and tight trading range! And this is more related to Yellen's perception and ecominc outlook for the Fed's taper schedule of providing more to help the US economic recovery.  Please take note of the original date above 11.12.13 of this analysis, while it is still quite effective inspite of the stream of market data for the week.

As of 11.12 : Observing market action from the sideline has its benefits of being able to clearly see through the market's price volatility and investors market sentiments. The main market drivers can only be summarized into two segments, namely ECB Mario Draghi's rate cut decision and the much better than expected Non-Farm Payrolls report.

CCy Insight & Price Behavior: USDJPY
CCy Insight : GBPJPY Cross rate

Post-FOMC Dampens USD Bulls UPDATE: 9.18

In summary, the FOMC stance on delaying taper schedule has obviously pressured the USD which prompted the European majors including the Aussie Dollar to rally. Outperforming the rest of the currency class, major bulls USD traders and investors sentiments have been dampened by this report.

The USD Index traded to as low as 80.05 basis point where the 79.85 is in sight that could meet USD short-cover and market capitulation for most speculative positions holding short-Cable positions for some time now in particular. Although, price levels on the USD and the rest of the European majors are within their technical over-bought area. And expect daily session correction adjustments. But the relative strength of these majors like Cable is likewise supported by positive fundamentals from the UK sector.

Cable have registered a daily high after the FOMC report @1.6162, with the Euro steady @1.3540 with spill over market price sentiment in the Aisan opening session. With most traders more reluctant to take positions at these price levels leaving uncertainty for retail speculators to take to the sidelines and simply watch how the week's trading sessions would end either on a higher or corrective mode.

Post-FOMC dampens USD Bulls UPDATE: 9.18

MegaTrade101.com - Market Insight IV: Expectation vs. Market Perception

Expectation vs. Market Perception Majors & Crosses

After a lackluster trading week, we do expect an increase in market activity moving forward with another round of market reports are in the pipeline. On the other side of the European continent would be the German CPI forecast @1.7% and the Unemployment figure for July which is expected to remain the same.

While the US Consumer confidence is expected to correct and again the much anticipated FOMC meeting and rate decision scheduled on Wednesday would likewise provide the impetus for market volatility, along with US GDP Annualized figure forecast @1.0% vs. the previous figure of 1.8%. And Thursday highlight would be focused on the BOE rate decison on top of the Asset Purchase target for August together with the ECB rate decision is included in the schedule.

Coming through the US trading session, would be an expected increase in the ISM Manufacturing figure and culminating Friday with the Non-Farm Payrolls and unemployment rate adding to a long list of event risk the market particpants would have to absorb.

MegaTrade101.com - Market Insight IV: Expectation vs. Market Perception

Market Volatility Ahead

The start of the third (3) quarter trading for a Monday remained at an initial stand-still with no solid price action seen except for short-session rally with the EURGBP cross rate. The string of reports this week from both sides of the continent would create a market squeeze with the upcoming "Fourth of July" celebration this Thursday.

Although the market's ability to provide price action would provide a volatile thin market price swings due to the scheduled market reports, particularly the Bank of England & ECB rate decision on the 4th of July holiday, and US unemployment & Non-Farm payroll figures thereafter. Thus-keeping market checks on rapid price swings during a thinly traded market where major players would take advantage of the market conditons from retail investors.

We, remain firm from our recent market view analysis as of June 27-28 with the same price parameters and market strategy in-place for the remainder of the week. With some minor price adjustments by mid-week before taking off for the holiday schedule. Although, monitoring price action would be important even after thursday's report would certainly put some milder pressure on the US session. But then again, watch for early trading reactions from the Asian traders and market price action from the start of the European sessions by Wednesday. 

Directional Trend remains...

with daily price swings as major corrections.

After a around of mixed reports, the dominating influence still has been ECB Mario Draghi's remarks that have pushed the Euro to decline last week and supported the US Dollar to recover above the 80.05/10 psychological resistance levels again.

The market's sensitivity to these news wire have made it more difficult for market participants to play the price swings that dominates the market place. Although, there were previous game changing signals that we mentioned prior to the price decline that we have seen with some of the majors & crosses, the present recovery has been more a relief and a spill over on the EURGBP cross has made a considerable rebound more appealing for bullish traders. A quick note of reference is that a major correction will always exist within a major trend but more so specially within a reinforced trend. Market sentiments remain strong for the bigger picture with a price reversal wide enough for others would call it as a trend reversal.
The EURUSD declined to a near low @1.3350 and currently @1.3435

Market Analysis: SRO 10.9

Indeed, the spill-over reaction from last Friday's unemployment report have had a more direct impact with the USDx opening with a gap Monday at the 79.50 basis point versus the closing price of 79.30.

Undoubtedly small, but the reaction made across the board where unexpectedly stronger with the direct effect seen more with the Sterling Pound plunging to it lowest price of 1.6000 as of this writing. This added on top of the BoE unchanged stance with their monetary policies on Quantitative easing regarding their Asset Purchases that remains the same.

Sequential Trade plan & execution:

This move affected the GBPJPY cross rates retreating down to its previous support price at the 125.50 and registering a low extension at the 125.10. However, this was undoubtedly been expected based on our Market view dated the 2nd of October; as Friday's closing lower from the high alongside with the GBPUSD have indicated an exhaustive price action when the unemployment data was released. Which prompted us to settle before the closing the two (2) GBPJPY long position still above the average price entry with a net positive end-result on the way lower. Which still was an excellent strategy while leaving the AUDUSD well within it target levels to be able to maximize the market's potential heading down to the 1.0150 target objective. It only takes one (1) very good trade to be up every month spread over a well risk defined trade plan.

While the AUDUSD have indded achieve this objective registering a low at the 1.0148 at the opening of this trading week. And is currently on a corrective mode working at the 1.0203 as of this writing. This would prompt us to consider liquidation of the short-position of 1.0409 before the closing of today's North American trading sessions that would provide us a substantial net gain of over 200 pips the least. Although, the Aussie still remains bearish; following our trade plan would make more sense in doing so while watching for the next probable set-up. 

Market Behavior:

Technical Perspective: GBPUSD

GBPUSD: The weekly cross-hair after a daily - rounded top consolidation has provided the Sterling Pound's weakness. Currently working at the 1.6190 would continue its decline and daily pull-back near the 1.6100/10 levels (S1).

Bullish momentum have declined from its daily consolidation while the gradual decline has been more associated with the strength of the USD and its related favorable reports the past couple of days. For now the registered high @1.6308 would serve as its initial topping-out formation and price levels. As long as the USD remains in positive territory a gradual decline can be expected.

Although, the daily bar chart in this figure shows the pullback from its daily corrective high @1.6174 failing to maintain and closed lower for the first trading day of October. Extensions to watch for are the 1.6050 (S1) levels and 1.6185/95 (R1) on a corrective move whenever favorable reports would come out of the UK and EU zone for the weeks ahead.

Current prices are stable for now while traders are waiting for some important figures this week from the Bank of England, the US FOMC minutes and particularly the unemployment figures. 

Tug of War 3 - ECB vs. FED or Bundesbank

Is Mario Draghi - the new sheriff in town?

The strong statement by the ECB President-Mario Draghi has placed him to our opinion, "as the new sheriff in town!" The Tug of war between European government policy makers has been dragging on for quite sometime with the unresolved crisis between the other neighboring countries in Europe has had a nibbling effect on the global economy. But for now those statements made have given some relief for the Euro in managing to gain some ground from its initial low price of 1.2041, as compared to the 1.1875 dated last June of 2010 and in November of 2005 were it touched a low at 1.1640. Which we believe that the ECB would not allow such price levels to go any further. 

Although, a weak Euro is as constructive as it can get for manufacturing sector, which is extremely good for Germany and France, as well as Italy for that matter. Especially in these critical times where exports are encouraged to spur-up growth for Italy. Nonetheless, Draghi's have caught a lot of traders and investors by surprise and is subsequently being challenge to show what he really has in store. Meaning, what else would he do with the up coming meetings by both the ECB and the Fed this week.

Please continue.....

DXY vs. EUR & GBP

The vulnerability of prices influenced by Mario Draghi's comments still weighs in the market. However, the talks of Quantitative easing, continued crisis in Europe compared with the upcoming FOMC report,BoE rate decision and Friday's Non-farm payrolls number would again prove not only the vulnerability of analyzing the market's direction. But also how price volatility would occur during this week's reports.

Price action and market behavior's mix reaction have been due to these factors and would likely continue until a more defined direction would lead investors sentiments towards the Forex market.

Meanwhile, majority of market participants still weighed-in the Global Stock market as the Dow Jones continued working above the 13000 levels as expectations that the U.S. Federal Reserve and European Central Bank will provide stimulus to support the economies on both sides of the continent.

Although, the USDx have closed below the initial su;pport level of 83.05 by closing the previous week at 82.70 basis point; with the adjusted trendline support indicates that its closing price at the 82.70 has recovered at the opening of the trading day on Monday. Pls. continue at http://megatrade101.com/